by Qantas will fork out $100m in civil penalties and pay $20m to customers in compensation, after striking a deal with the consumer watchdog over a landmark legal action it allegedly sold thousands of tickets to flights that had already been canceled in its system.
On Monday, Qantas announced that it had reached an agreement with the Australian Competition and Consumer Commission (ACCC) to settle the court proceedings lodged in August last year, alleging that it advertised and sold tickets for more than 8,000 flights he had already cancelled. its internal system, a revelation that triggered the early retirement of former Chief Executive Alan Joyce.
In a statement, Qantas said it would “commence an anticipated $20 million remedial program for affected passengers, with payments to customers between $225 and $450, and subject to Federal Court of Australia approval, a civil penalty payment of $100 million”.
This is the largest corporate penalty settlement the ACCC has ever agreed to. The highest penalty, however, was $125m for breaching Australian consumer law – issued to Volkswagen in 2019 for misleading customers about diesel emissions.
Related: Qantas cancellations: ACCC takes airline to court alleging it sold tickets to planes that never flew
The proposed penalty must be approved by the federal court, although Qantas will begin the “improvement program prior to the Court’s approval process”.
ACCC chairwoman Gina Cass-Gottlieb said as part of the settlement Qantas admitted it had misled consumers. “The behavior of Qantas was appalling and unacceptable. Many consumers will have made vacation, business and travel plans after booking a phantom flight that was canceled,” said Cass-Gottlieb.
She said Qantas had also committed “not to engage in this type of behavior in the future”.
Qantas CEO Vanessa Hudson said, “Today is another important step forward as we work towards restoring confidence in the national carrier … we have since updated our processes and are investing in new technology across the Qantas Group to ensure that this will not happen again. “.
While the initial legal allegations were based on the flight data during the May-July 2022 monitoring period – a window in which 15,000 of Qantas’ 66,000 services were canceled – the airline said that by working with the ACCC on a settlement, it had come to light thousands. more cases of customers who were sold tickets to flights that had already been cancelled.
As such, Qantas has agreed to make compensation payments to 86,597 consumers who were booked or re-accommodated on a domestic or international flight scheduled to depart between 1 May 2022 to 10 May 2024 after Qantas. already decided to cancel it.
Compensation will only be made to those who booked a flight two or more days after the cancellation decision was made, and Qantas will contact eligible customers next month.
The cut-off date is 26 August 2023 when Qantas is confident that internal issues have been resolved so that its system will no longer sell tickets for flights that have already been cancelled.
As part of the agreement, Qantas has also agreed to notify customers of canceled flights as soon as possible, which is specified to be no more than 48 hours from the decision to cancel the flight. It also promised to stop selling canceled flights as soon as possible, and in any case within 24 hours of the decision to cancel. The business also belongs to its low-cost subsidiary, Jetstar.
Of the customers affected, 94% were flying on domestic or trans-Tasman routes, with the remainder flying on the international network. The financial hit of the penalty and corrections program would be recognized as an expense in the group’s statutory income statement for the current financial year.
Related: Qantas claims it only sells tickets for ‘rights measure’ flights in defense of ACCC case
In August, the ACCC filed proceedings in the federal court alleging that Qantas continued to advertise and sell tickets for more than 8,000 flights on its website for an average of two weeks, and in some cases up for 47 days, after the flights were cancelled.
The watchdog also alleged that for more than 10,000 flights scheduled over the same period in 2022, Qantas did not inform existing ticket holders that their flights had been canceled for around 18 days on the average, and in some cases for up to 48 days.
Qantas, in its defense of the legal action, claimed that it would not sell customers tickets to any particular flight, but a “proper measure” that includes alternatives in the event of cancellations, as it responded to allegations that it had sold them tickets. thousands of flights have already been cancelled.
The airline also claimed the sales were due to its online booking system, and informing customers that flights they had already canceled had caused “uncertainty and frustration” and overwhelmed its phone lines when they were automatically notified of the cancellation. no replacement flight allocated.
Before the settlement, Cass-Gottlieb said she wanted to hit Qantas with penalties of at least $250m, double the largest ever.
On Monday, however, she said she was satisfied with the lesser punishment because he had received an early settlement, admissions of misconduct by Qantas, and a promise to improve in the future, including the budget carrier’s operations. Jetstar.
“If we had gone through and Qantas had continued to contest and defend, then we would have been seeking hundreds of millions of dollars,” she said.
In a compromise, the ACCC agreed to drop its allegation that Qantas charged for any service, and let the airline defend that it only sells a bundle of rights rather than a ticket to a specific flight.
Hudson said this concession would not have implications for how it sells flights in the future, where terms and conditions of sale specify that the date and time of departure are not part of a customer’s contract with the airline.
“Even on the ACCC website, it notes that airlines cannot guarantee specific flight times on specific dates…There will always be situations where changes to flight times or cancellations need to be made,” Hudson said.
In February, Hudson reported a half-year pre-tax profit of $1.25bn in its first financial results for the airline, and rewarded shareholders with a $400m buyback after a turbulent period that did not sit well with its predecessor. The profit result was down 13% from the highest full-year profit of $2.47bn posted in 2022-23.
