Qantas is scrapping the expiration date on travel credits worth hundreds of millions of dollars after a public backlash.
The airline has almost $500 million in outstanding flight credits, with an extra $100 million unredeemed 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 frequent flyer points for flights booked between September 4 and December 31.
Qantas COVID credits can't be converted to travel bookings beyond this year.
But Qantas boss Alan Joyce said the credits could be swapped for a cash refund and Jetstar ones would be extended indefinitely.
Mr Joyce said he hoped the move would help restore customer faith.
"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.
The airline faces legal woes on top of customer backlash, with the consumer watchdog alleging it advertised tickets for 8000 flights that were already cancelled.
The Australian Competition and Consumer Commission has launched Federal Court action 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.
The ACCC also alleged 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 watchdog 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 - about 15,000 - of its flights between May and July 2022.
ACCC chair Gina Cass-Gottlieb said the watchdog wasn't alleging any breach in relation to flight cancellations but was pursuing Qantas about its conduct after the flights had been cancelled.
The ACCC is seeking penalties, injunctions, declarations and costs.
Australian Council of Trade Unions secretary Sally McManus accused Qantas of gaming the system and ruthlessly pursuing profits, including by taking advantage of labour hire workers.
"We've just got no respect for Qantas and we really hope there will be a change in attitude," she said.
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 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 the watchdog's claims were deeply concerning.
Nationals senator Bridget McKenzie called for the treasurer to direct the ACCC to monitor the aviation industry and investigate airline competition after the government blocked Qatar Airways from flying extra services.
She accused the government of going soft on airlines.
