Written by Byron Kay and Poonam Behura
SYDNEY (Reuters) – Australia's Qantas Airways agreed to pay A$120 million ($79 million) to settle a lawsuit before a regulator over the sale of thousands of tickets on already-canceled flights, in an attempt to end the reputation crisis that has engulfed the airline.
The company will split the A$20 million between more than 86,000 customers who booked tickets on so-called “ghost flights” and pay a A$100 million fine rather than defend the lawsuit it previously pledged to fight, Qantas and its Australian rival. The Consumer Commission (ACCC) said on Monday.
The fine is the largest ever for an Australian airline and among the largest globally in the sector, although some Australian banks and casino operators have faced higher penalties for breaches of the law.
“We recognize that Qantas has let customers down and fallen short of our own standards,” CEO Vanessa Hudson (NYSE:) said in a statement.
Hudson, who began her role in September, added that the settlement “means we can compensate affected customers much sooner than if the case had continued in federal court,” noting that the court must still sign off on the settlement.
If approved by the court, the settlement would resolve a dispute that has come to prominence at a time when Qantas' brand value has fallen in consumer surveys amid a spike in complaints about cancellations. After the Australian Competition and Climate Commission filed the lawsuit last August, Hudson's long-serving predecessor, Alan Joyce, announced his retirement date.
“This penalty… will send a strong message of deterrence to other companies,” ACCC Chairwoman Gina Cass Gottlieb said in a statement.
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However, the payment would be dwarfed by the A$1.47 billion net profit that analysts on average expected Qantas to report in the year to the end of June, according to LSEG data. People who bought tickets on non-existent domestic flights will get A$225, while people on international fares will get A$450, plus a refund, the airline and regulator said.
Qantas shares stabilized in late trading, compared to a 0.6% gain in the broader Australian market.
“We see today’s result as increasingly positive, as it removes another post-coronavirus brand and valuation buildup from the stock,” RBC Capital Markets analyst Owen Birrell said in a note to clients.
Qantas is still waiting to find out how much it must pay about 1,700 ground handling staff it sacked in 2020 after a court found the job cuts were unlawful because they were aimed at stopping industrial action.
The ACCC lawsuit centered on the months after Australian borders reopened in 2022 after two years of COVID-19 restrictions, and airline cancellations and lost baggage rose globally amid staff shortages.
Qantas said it faced similar challenges to airlines around the world, but the Australian Competition and Climate Commission said its actions breached consumer law. She said the airline sometimes sold tickets for flights weeks after they were cancelled.
The ACCC's Cass Gottlieb noted that the settlement included a promise from Qantas not to repeat this behavior.
($1 = 1.5124 Australian dollars)