Virgin Australia customers who booked tickets before the airline went into administration when COVID-19 grounded most of its planes, are set to lose hundreds of millions of dollars in unused flight credits if they do not book new flights before the end of this year.

The airline has confirmed it still holds $270 million in Future Flights Credits that will expire on December 31 from customers who made bookings before April 21 2020.

The company’s hardline approach has been slammed by consumer advocates who are calling on Virgin Australia to properly consider the individual circumstances of customers.

Virgin Australia was one of the first major airlines in the world to go bust under the strain of COVID travel bans and went into voluntary administration one month after the federal government closed Australia’s borders in March 2020.

Virgin Australia won’t confirm how many customers hold credits because it says that information is “commercially sensitive”.

Disability pensioner Karen Lancaster stands to lose about $15,000 in credits because the airline won’t allow customers to make new bookings with codeshare and partner airlines with the exception of Alliance Airlines.

Ms Lancaster drained her superannuation account in 2019 to afford two return business class tickets to fly to Los Angeles to visit her son and his wife and meet her adult granddaughter for the first time.

“I’m 71, I have some health issues,” she told 7.30.

“[My son has] had leukaemia, it might be my one and last chance to see him and, I’ve never met my granddaughter, she’ll be 21 in February.

“I speak to her on the phone, but I’ve never met her person-to-person and the thought of just giving her a big hug, it’s hard.”

Ms Lancaster is legally blind and needs a carer to travel, she needed to book business class tickets because she has a health condition that makes long-haul flights uncomfortable.

Aviation analyst Geoff Thomas said Virgin Australia has drastically cut the number of international routes it operates since it was bought by American private investment firm Bain Capital and came out of administration in November 2020.

“As part of the restructuring process Bain Capital have disposed of the Boeing triple sevens and the Airbus A330s, which were the aeroplanes they were using for international routes, and some domestic routes,” Mr Thomas told 7.30.

Ms Lancaster was due to fly to the US in June 2020 and she said when her flights were cancelled she was told she would be able to fly to Los Angeles with Virgin Australia when the borders reopened.

“And so I never worried I could have got my money back, and then they changed their mind.

“They told me that they wouldn’t give me a refund, that I could use my money as a credit to go anywhere in Australia, New Zealand, Christmas Island, Bali, Fiji, Solomon Islands,” Ms Lancaster said.

She is now holding credits that are effectively useless because she does not want to fly anywhere else.

“No, why would I want to go anywhere else — I’m blind,” she told 7.30.

“I can’t see what’s around me, I cannot enjoy it.

“I only want to go to America to see my family, that’s all I want. I don’t want anything else.”

Unsecured creditors

When Virgin Australia went into voluntary administration its customers became unsecured creditors.

Lawyer Stephen Nowiki, from the Consumer Action Law Centre, said that leaves credit holders like Ms Lancaster with limited legal options.

“Effectively, in going through administration, the new owners of Virgin reached an agreement for their new purchase of Virgin, and part of that was paying out certain creditors. But consumers were only offered the option of flight credits,” Mr Nowiki said.

“Unfortunately, there are times when we see large corporations unable to take into account individual circumstances. And there’s nothing preventing them from doing that.

“The money that she paid and others paid, has been used to either pay off other creditors of the businesses or to, I guess, for the benefit of the new owners,” he said.

In a letter to Ms Lancaster last month, Virgin Australia explained the agreement made in the restructuring process handled by the appointed administrator Deloitte.

“To ensure that Virgin Australia remains a viable company in the future, Deloitte has determined that any booking made prior to Virgin Australia going into administration could not be refunded, and the funds must remain with the business,” the letter stated.

Virgin Australia declined an interview with 7.30, but in a statement said: “The new Virgin Australia business does not hold any of the funds customers paid for these bookings.

“We are committed to helping customers impacted by flight cancellations, and we have extended the expiry date for Future Flight Credits multiple times in recognition of the challenges COVID posed to travel. These credits will expire on 31 December 2023, over three years after they were issued,” the statement said.

Virgin has bounced back since COVID and last month the airline posted its first profit in more than a decade of $129 million.

New owner Bain Capital is also preparing to relist the airline on the Australian Stock Exchange.

Consumer advocates call on Virgin Australia to ‘do the right thing’

Virgin Australia is allowing other customers affected by COVID cancellations for bookings made between April 2021 and July 2022 to use credits on codeshare airlines.

Choice chief executive Alan Kirkland has called on the airline to “do the right thing” for customers like Ms Lancaster.

“Airline passenger rights in Australia are abysmal by global standards in other major economies. In the EU, in the US, if a flight is cancelled, or even if it’s delayed by more than three hours, you’ve got clear rights to compensation and to refunds, whereas in Australia, the airlines can pretty much make up their own rules,” Mr Kirkland told 7.30.

Mr Kirkland has accused the company of hiding behind a legal technicality to avoid dipping into its profits to refund customers for services it can no longer provide.

“Virgin should be treating this like a moral issue, not a legal issue,” he told 7.30.

“We want to see massive public pressure on Virgin to do the right thing, just as a wave of customer anger has forced Qantas to change its policies around travel credits, we think the same should happen with Virgin.”

Ms Lancaster has no other savings and no superannuation left because she spent it on Virgin flights.

Her wish is for the airline to change its mind.

“I feel very much as if I’m not a second-class citizen but a third or fourth. That I’ve got no rights at all, that anybody can do what they like because I have a disability.

“And that makes me angry.

“I feel this is my last chance in a way that, if I don’t do it now I may not ever be able to do it,” she said.

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