Qantas is scrapping the expiration date on hundreds of millions of dollars worth of travel credits following a public backlash.
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The national carrier has almost $500 million in outstanding flight credits, with an extra $100 million yet to be redeemed by Jetstar customers.
The credits were due to expire at the end of the year and be added straight to the Qantas bottom line.
To encourage more people to reconnect with their credits, the airline is also offering double the number of frequent flyer points from flights booked between September 4 and December 31.
Qantas COVID credits can't be converted to travel bookings after this time.
But CEO Alan Joyce said Qantas COVID credits could be swapped for a cash refund at any time, and Jetstar ones would be extended indefinitely.
Mr Joyce said he hoped the move would help change the fact that people had lost faith in the airline's processes.
"We're doing this because we listened - we know the credit system wasn't as smooth as it should have been," he said in a video statement on Thursday.
But the airline is also facing legal woes on top of customer backlash, with the consumer watchdog alleging it advertised tickets for 8000 flights that had already been cancelled.
The Australian Competition and Consumer Commission (ACCC) is launching action in the Federal Court claiming Qantas engaged in false, misleading or deceptive conduct after continuing to sell the tickets for an average of more than two weeks, and up to 47 days in some cases.
It is also alleging the airline didn't notify existing ticketholders for 10,000 flights that they had been cancelled for an average of 18 days, and up to 48 days, between May and July 2022.
This left customers less time to make alternative arrangements and may have led them to pay higher prices.
The ACCC said Qantas continued to sell tickets for the flights on its website for two or more days, and delayed informing ticketholders their flights were cancelled for the same period of time for about 70 per cent of cancelled flights.
Qantas cancelled a quarter of its flights between May and July 2022, which amounted to about 15,000 flights, the watchdog said.
Chair Gina Cass-Gottlieb said the commission had conducted a detailed investigation into the airline.
"As a result, we have commenced these proceedings alleging that Qantas continued selling tickets for thousands of cancelled flights, likely affecting the travel plans of tens of thousands of people," she said.
"This case does not involve any alleged breach in relation to the actual cancellation of flights, but rather relates to Qantas's conduct after it had cancelled the flights."
The ACCC is seeking penalties, injunctions, declarations and costs.
Qantas said in a statement it took the ACCC allegations seriously.
"We have a longstanding approach to managing cancellations for flights, with a focus on providing customers with rebooking options or refunds," the airline said.
"It's a process that is consistent with common practice at many other airlines."
It noted the period examined by the ACCC was a "time of unprecedented upheaval for the entire airline industry".
"We will examine the details of the ACCC's allegations and respond to them in full in court," the airline said.
Treasurer Jim Chalmers said they were "deeply concerning allegations".
Australian Associated Press
