ACCC pressures Flight
Centre to waive cancellation fees on some fare refunds
It took more than 6,000 consumer complaints to
the ACCC, comments on Facebook pages such as ‘Flight Centre
Give Us our Refunds’ and refund requests by its customers,
before Flight Centre agreed to waive its cancellation
fees for fare refunds in situations where the travel
provider has cancelled its service - and the customer is
unable to travel as a result.
Flight Centre’s Terms and Conditions provide:
- Cancellations to Domestic/Trans-Tasman bookings will
incur a fee of $50 per passenger per booking in addition
to supplier fees.
- Cancellations to International bookings (excluding
Trans-Tasman bookings) will incur a fee of $300 per
passenger per booking in addition to supplier fees.
From mid-March 2020, the COVID-19 pandemic took hold,
borders were closed and travel bans were put into place.
Airlines, cruise lines, tour operators and other travel
providers cancelled flights, cruises and tours. Airlines and
cruise lines offered refunds, ‘flight credits’ and ‘cruise
Customers who chose refunds were unhappy to be told by
their travel agent, Flight Centre, that these refunds would
be subject to Flight Centre’s cancellation fees, despite the
fact that the cancellation was as a result of an unforeseen
event outside of the control of the travel agent or travel
Customer anger was rising. The ACCC (the Australian
Competition and Consumer Commission) applied pressure on
Flight Centre to waive its cancellation fee for flights,
cruises and tours cancelled due to COVID-19 travel
The following is Flight Centre’s announcement, the ACCC’s
Media Release, my analysis and tips for valid cancellation
On 2 May 2020, Flight Centre issued this Coronavirus
Travel & Business Update
An Update To Our Change &
“On 2 May 2020 we announced an amendment to our Change
and Cancellation Policy for our customers.
To support Australians during this very difficult time,
Flight Centre and our parent company FCTG has made the
decision to completely waive our usual Cancellation Fees for
bookings where the travel provider (usually an airline,
cruise line or tour operator) has cancelled its service -
and you are unable to travel as a result.
The waiver, which is in addition to the other waivers and
amendments that we have announced previously, follows
ongoing discussions with customers and regulators, including
the ACCC, and will apply retrospectively to bookings
cancelled as a result of COVID-19 on or after 13 March 2020
for which a Flight Centre Cancellation Fee was charged.
Please note this waiver applies to our fees – we cannot
waive fees or conditions that airlines and other third party
We also announced our offer of an additional Flight
Centre credit voucher of up to $200 per person to customers
who choose to keep their money on file with us.”
Comment: This waiver is limited to refunds to
customers resulting from travel providers cancelling travel
as a result of COVID-19 travel cancellations. Cancellation
Fees remain payable by customers who cancel travel
arrangements in all other situations.
On 3 May 2020 the ACCC issued this Media Release
Flight Centre to refund
“The ACCC has welcomed the announcement that Flight
Centre will stop charging customers hundreds of dollars in
cancellation fees in order to get a refund for travel
cancelled due to the COVID-19 pandemic.
Flight Centre will refund thousands of customers who,
from 13 March, were charged $300 per person to get a refund
for a cancelled international flight or $50 for a domestic
Flight Centre’s decision follows weeks of pressure from
the ACCC for Flight Centre to improve its treatment of
customers during COVID-19 travel restrictions.
The ACCC said its next step would have been court action if
Flight Centre did not change its position.
“We are continuing to discuss issues in relation to
refunds and cancellations with the travel sector, and
encourage travel providers to treat consumers fairly in
these exceptional circumstances.” ACCC Chair Rod Sims said.
… a consumer’s right to a refund during this period will
depend on the terms and conditions of the contract entered
into with travel provider …”
Comment: The ACCC has dealt with the deluge of
complaints specifically travel agents cancellation fees
where the travel provider cancels due to a COVID-19
situation, but not with travel agents cancellation fees more
Analysis – Can travel
agents charge cancellation fees?
The short answer is yes, provided that the term
which authorises the cancellation fee to be charged is
not an unfair contract term.
The ACCC did not share the legal basis for the pressure
it applied to Flight Centre, but the reference to ‘terms and
conditions’ in the Media Release makes it safe to assume
that the ACCC pointed out to Flight Centre that its
cancellation fee term was an unfair contract term if
it was applied in the situation where the travel provider
cancelled the travel booking.
This is an analysis.
Under Part 2.3 of the Australian Consumer Law, a
contract term is considered to be unfair if it is in a
standard form contract and:
- it causes a significant imbalance in the rights and
obligations arising under the contract; and
- it is not reasonably necessary in order to protect
the legitimate interests of the party who would be
advantaged by the term; and
- it would cause detriment (whether financial or
otherwise) to a party if it were to be applied or relied
The Flight Centre cancellation fee term appears to be
unfair under these criteria because:
- There is a significant imbalance in rights, in that
the customer bears all the financial risk where the
travel provider cancels the travel, and Flight Centre
none of the risk.
- It is not reasonably necessary to protect its
interests for Flight Centre to charge a flat fee which
is potentially much greater than its loss on
cancellation which is a commission of 5% to 10% of the
fare and the administrative cost of processing the
refund. To give an actual example, on a return fare of
$758 to Japan, the fee of $300 represented 40% of the
- It causes financial detriment to the customer
because it is can be a high percentage of the fare.
Tips for valid cancellation
The Flight Centre waiver is limited to COVID-19 related
cancellations. But there is a respectable argument that the
cancellation fee term as drafted in an unfair contract term
It is therefore worth considering what a fair
cancellation fee term might look like.
I state these three rules for a fair cancellation fee
- A travel agent’s cancellation fee needs to reflect
the loss the travel agent suffers if the travel booking
- The amount of the cancellation fee should be
proportionate to the travel agent’s loss, which is the
amount of commission lost and the administration cost of
processing the cancellation.
- It is best if the travel agent includes a term
setting out the cancellation fee on the tax invoice it
issues for payment (before payment is processed). For
bookings made online, the term appears in the terms and
conditions that must be accepted before payment.