The class action was being brought by Echo Law, which is also investigating the potential of a similar action against Qantas subsidiary Jetstar.

The case was being funded by CASL and alleges that Qantas engaged in misleading or deceptive conduct.

“In particular, this claim arises due to the manner in which Qantas communicated with its customers in early 2020 about their options in respect of flights that could not proceed due to Covid-19 restrictions,” the firm said.

It also claimed that Qantas “has been unjustly enriched by holding a very significant quantum of customer funds that ought to have been refunded.”

Echo Law partner Andrew Paull said there was 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”.

“We allege Qantas breached the law by failing to be transparent and immediately issue refunds to customers when flights were cancelled. Instead Qantas held on to customers’ money and pushed out travel credits with strict conditions, which we allege it was not entitled to do.

“It now needs to be held accountable and refund the money with interest.”

He said customers had been required to pay the airline more than their original booking to use their credits on new fares and had been pressured by the airline to do that or lose the value of their flight credit.”

Qantas has rejected the claims and said the majority of customers could get a refund. It said it had been running full-page advertisements and sending emails asking customers to contact them if they wanted a refund.

“Qantas has one of the most flexible Covid credit policies of any airline, including among our global peers, and we have extended the expiry dates three times,” the airline said.

It said it had not been served any claim as of midday August 21. There were currently about $400 million Covid credits remaining with Qantas customers and they range from $100 to $500.