Avoiding a full court case over misleading representations made to consumers between 2021 and 2023, Qantas has reached a $120 million deal with the Australian Competition and Consumer Commission (ACCC).
In an ASX announcement on Monday, Qantas confirmed it has agreed, in a court-enforceable undertaking, to a projected $20 million remediation program for more than 86,000 impacted passengers, and a $100 million civil penalty, pending approval from the Federal Court of Australia.
This follows Federal Court proceedings launched by the ACCC last year over allegations that the national carrier advertised tickets for over 8,000 cancelled flights between May 2021 and July 2022.
Under the announced agreement with the ACCC, Qantas admitted misleading representations were made to consumers in respect of flights it had decided to cancel and acknowledged its misconduct continued from 21 May 2021 until 26 August 2023.
ACCC chair Gina Cass-Gottlieb termed Qantas’ conduct “egregious and unacceptable” and highlighted the national carrier’s cooperation in ultimately deciding not to contest this case and seeking to resolve this early.
The settlement announcement saw an immediate reaction from markets on Monday, with Qantas’ share price dipping to $5.82 from $5.88 at close of trading on Friday.
However, over the course of the day, the shares rebounded, reaching $5.91 by noon.
As at the end of trading on Monday, the price recovered to $5.88.
Addressing the proceedings, Qantas Group chief executive Vanessa Hudson said this marked an “important step forward” to restoring confidence in the national carrier.
“When flying resumed after the COVID shutdown, we recognise Qantas let down customers and fell short of our own standards. We know many of our customers were affected by our failure to provide cancellation notifications in a timely manner and we are sincerely sorry,” she said.
“The return to travelling was already stressful for many and we did not deliver enough support for customers and did not have the technology and systems in place to support our people.”
Hudson confirmed the airline has since updated its processes and is investing in new technology across the group to avoid repetition of such incidents.
“We thank the ACCC for their cooperation in reaching this outcome, which means we can compensate affected customers much sooner than if the case had continued in the Federal Court. We are focused on making the remediation process as quick and seamless as possible for customers,” she said.
With the remediation program, Qantas will pay $225 to domestic ticket holders and $450 to international ticket holders. These payments are on top of any remedies these consumers already received from Qantas, such as alternative flights or refunds.
With this, the ACCC will no longer proceed with its claims against Qantas about wrongful acceptance of payment, including any allegation that Qantas received payment for a service it did not and had no intention of providing.
Additionally, in terms of financial impact, Qantas explained the remediation program and penalty will be recognised as an expense in the group’s statutory income statement for the year ended 30 June 2024.
It will be recognised as an item outside of underlying profit before tax.
“The timing of the cash outflow in relation to the remediation program and penalty is expected to occur after 30 June 2024 and therefore will not materially impact net debt or free cash flow for the FY24 financial year and will occur instead in the FY25 financial year,” it confirmed.
