Air New Zealand is coming under fire from frustrated Kiwis after the airline declined to offer refunds on non-refundable tickets. Air New Zealand has slashed international and domestic capacity in the last few months, canceling thousands of flights. That has left a lot of passengers grounded and holding onto potentially worthless tickets.

Consumer watchdog takes up the cause for passengers

Angry passengers have been flooding the government watchdog, Consumer New Zealand, with complaints. So much so, that CEO, Jon Duffy, has begun banging the drums to ratchet up the pressure on Air New Zealand.

"I'm really surprised that they are holding the line against overwhelming public opinion - they've done irreparable damage to their brand," Mr Duffy told The New Zealand Herald today.

Air New Zealand has been refunding tickets to passengers who bought more expensive, refundable tickets. It has also issued refunds to passengers holding non-refundable tickets on flights into jurisdictions with different consumer laws, such as the EU.

But back in New Zealand, laws are somewhat different. Air New Zealand is perfectly entitled to offer passengers holding non-refundable tickets on canceled flights credits rather than refunds.

"We hope people look at our decisions with a degree of context," Air New Zealand's chief revenue officer, Cam Wallace, told Stuff today.

"Our business has been hammered so significantly, and so materially, that we have had to make some calls that ordinarily we might take a different approach."

Air New Zealand keen to hold onto their cash

Passenger loads on Air New Zealand were down 99% in April compared to the previous year.  Although the airline has cash reserves and a government contingency fund worth US$580 million it can draw against, Air New Zealand is on a mission to conserve cash.

"If we were to open the floodgates and refund those that would accelerate the requirement to use the loan and we would have to make some even more aggressive changes to our cost base," said Mr Wallace.

It is estimated annoyed New Zealanders are holding about US$65 million worth of non-refundable tickets they haven't been able to use.

Air New Zealand's stance isn't good enough for Consumer NZ. They argue grounded passengers should have been given a choice of a refund or credit. Odds are most would choose the cash, and that would eat into Air New Zealand's remaining reserves.

It's something Cam Wallace is keen to avoid at all costs. But he says the airline isn't being over the top about it.

"It's not true to say this is a blanket policy right across the business. We have made exceptions where people have come to us with a valid case of extreme hardship," he told Stuff.

Mr Wallace also notes now domestic flying in New Zealand is resuming, people are starting to use their credits and take to the skies again.

Air New Zealand not alone in making refunds difficult

While Air New Zealand's reluctance to part with cash may not be going down too well amongst normally fiercely loyal Kiwis, the airline is hardly alone taking this position.

Across the Tasman, squeezing cash out of either Qantas, Jetstar, or Virgin Australia after having had a flight canceled is a complicated process. In Thailand, THAI Airways has suspended refunds while the airline undergoes a financial restructure.

You might argue you take your chances when you buy non-refundable tickets. Plenty of people do. Equally, non-refundable or not, a passenger rightly expects the contracted service to be provided. It's a tricky situation. Consumer NZ's Jon Duffy notes;

"While it’s a tough time to be an airline, it’s also a pretty tough time for many consumers."