Qantas has been hit with a class action lawsuit seeking millions of dollars in refunds and compensation for customers who had flights cancelled following the COVID outbreak.

Echo Law filed the lawsuit against Australia’s national carrier in the Federal Court on Monday, alleging the airline misled customers about their refund options, withheld funds, and engaged in a “pattern of unconscionable conduct”.

The airline rejects this, saying it has refunded more than $1 billion to customers impacted by flight disruptions in 2020 – the first year of coronavirus pandemic, which sparked lengthy border closures.

The legal action comes one month after Qantas launched a campaign to encourage customers to use the remaining $400 million in flight credits held by the airline, and after Australia’s consumer watchdog indicated its probe into the issue was almost complete.

Backed by litigation funder CASL, the lawsuit alleges Qantas breached Australian consumer Law by failing to immediately issue refunds and retaining customers’ funds when flights were cancelled in 2020.

Echo Law partner Andrew Paull said Qantas initially only offered customers access to use “travel credits with strict conditions” rather than returning their money.

“We allege Qantas breached the law by failing to be transparent and immediately issue refunds to customers when flights were cancelled,” he said.

“While COVID posed major disruption to air travel and resulted in cancellations that no airline wished to make, that is no excuse for Qantas to take advantage of its own customers and effectively treat them as providers of over $1 billion in interest-free loans.”

Mr Paull claimed some Qantas customers had been forced to spend more money with the airline to use their flight credits, while others may not be able to use credits before they expired on December 31, 2023.

“While Qantas has talked in recent weeks of giving customers the option of requesting a refund, this is both too little and too late,” he said.

Mr Paull said the lawsuit sought immediate refunds of all remaining credits and “compensation for the time customers have been out of pocket”.

Qantas said its flight credit policies were among the most flexible in the world and it had improved its system to simplify the refund process.

“We have already processed well in excess of $1 billion in refunds from COVID credits for customers who were impacted by lockdowns and border closures,” the airline said in a statement.

“The majority of customers with COVID credits can get a refund and we’ve been running full-page ads and sending emails to encourage customers who want a refund to contact us directly.”

Qantas has extended the expiry date on travel credits issued in 2020 three times.

The Australian Competition and Consumer Commission has been investigating Qantas’ handling of credits and refunds after issuing a warning to the airline in 2020 and receiving a complaint from consumer group Choice in April 2022.

Also on Monday, Qantas announced plans to add more than 250,000 seats on its international network to destinations including New York, Los Angeles, Johannesburg and Bali.

The carrier said the boost would bring its capacity to 80 per cent of its pre-pandemic service.

– AAP