A class action against Jetstar on behalf of hundreds of thousands of customers whose flights were cancelled during the COVID pandemic has been lodged in the Federal Court.

The claim alleges Jetstar failed to refund money that customers had paid for flights, despite being legally obliged to do so.

Echo Law, which commenced the class action, is the same law firm that commenced a separate class action against Qantas in 2023 over that airline's COVID credits program, which is ongoing.

Jetstar Airways is a low-cost airline in the Qantas Group. 

"Jetstar promotes itself as a values-driven, low-fare airline committed to helping 'more people fly, more often', yet it's a highly profitable part of the Qantas Group, and when COVID caused widespread flight cancellations it put those profits ahead of its customers' interests," Andrew Paull, a partner at Echo Law, said in a press release.

"Jetstar customers were pushed into holding hundreds of millions of dollars in restricted travel credits, even though this wasn't what those customers had agreed to as part of the airline's terms and conditions. 

Mr Paull alleged that, like Qantas, Jetstar breached the law by failing to be transparent and by failing to refund its customers. 

"It held onto ordinary Australians' money and expected customers to just be happy with credits, which we allege it was not entitled to do. It now needs to be held accountable and refund that money with interest," he said.

"While customers sat at home not able to enjoy the benefits of flying, Jetstar enjoyed the significant financial benefits of holding hundreds of millions of dollars in customer payments including interest and reduced borrowing costs. 

"It is unfair, and we allege unlawful, that Jetstar profited from holding onto its customers' money for flights it had cancelled.

"Many Jetstar customers ended up paying the airline more than their original booking to use their credits on new fares, as they were led to believe they had little choice but to do that or else lose the value of the flights they paid for. 

"This is another unjust enrichment Jetstar has enjoyed," he said.

A Jetstar spokesperson told the ABC the airline would review the claims filed in the class action.

"Last year we removed expiry dates for COVID vouchers so they can be used indefinitely," they said.

"These vouchers are also multi use, meaning they can be used across multiple bookings and for multiple people."

What are the allegations?

Echo Law says the allegations against Jetstar laid out in the action include that:

• The COVID travel restrictions 'frustrated' Jetstar travel contracts, causing these contracts to be automatically terminated and giving customers a right to automatically recover money paid under those contracts.

Under Australian law, an event is 'frustrating' if it occurs without default of either party and renders the performance of contractual obligations impossible or radically different from what was originally contemplated.

• Jetstar's failure to issue refunds was a breach of contract.
• Jetstar engaged in misleading or deceptive conduct in contravention of Australian Consumer Law, by misleading customers as to their rights in the event of widespread COVID cancellations.
• By holding customers' funds that ought to be refunded, Jetstar attained unlawful financial benefit (including from the interest accrued).
• Jetstar have engaged in a system or pattern of unconscionable conduct in contravention of Australian consumer law.

The action is being funded by Court House Capital, an Australian-based litigation funder. 

Qantas flight credits saga and Alan Joyce

In August last year, in response to a public backlash, then-chief executive of Qantas, Alan Joyce, announced that Qantas would be removing the expiry dates on $570 million worth of COVID travel credits owed to Australian and international customers.

The flight credits had been issued up until September 30, 2021, and they were due to run out at the end of last year.

But Mr Joyce said Qantas customers with COVID credits could now request a cash refund, while Jetstar customers could use their COVID vouchers for flights indefinitely.

The move came hours after the competition regulator launched legal action against Qantas for allegedly selling tickets for thousands of flights that had already been cancelled during a three-month period in 2022.

Mr Joyce said the airline's customers would now be able to request a cash refund for their Qantas COVID travel credits at "any point in the future."

"These credits and vouchers will never expire," he said in a video statement.

"We're doing this because we've listened. We know the credit system was not as smooth as it should have been. And while we've improved it recently, and extended the expiry date several times, people lost faith in the process.

"We hope this helps change that," he said.

A week after Mr Joyce released that video statement, he stood down as Qantas chief executive. 

His departure from the airline came two months earlier than the company had been planning.

"In the last few weeks, the focus on Qantas and events of the past make it clear to me that the company needs to move ahead with its renewal as a priority," Mr Joyce said in a statement.