Qantas will pay out $100 million in civil penalties and pay $20 million to customers in compensation after striking a deal with the consumer watchdog over landmark legal action for allegedly selling tens of thousands of tickets for flights already canceled in the system.
On Monday, Qantas announced it had reached an agreement with the Australian Competition and Consumer Commission (ACCC) to resolve legal proceedings brought in August last year alleging it had advertised and sold tickets for more than 8,000 flights it had already canceled in 2011. its internal system, revelations that hastened the early retirement of former CEO Alan Joyce.
In a statement, Qantas said it would "initiate a $20 million recovery program for affected passengers, with payments to customers ranging from $225 to $450, and subject to the approval of the Federal Court of Australia, a civil penalty of $100 million pay." .
It is the largest corporate fine settlement the ACCC has ever agreed to. However, the record fine for breaching Australian consumer law was $125 million, which was imposed on Volkswagen in 2019 for misleading customers about diesel emissions.
Related: Qantas cancellations: ACCC takes airline to court for selling tickets for planes that would never fly
The proposed fine will have to be approved by the Federal Court, although Qantas will commence the "remediation program prior to the court approval process".
ACCC chair Gina Cass-Gottlieb said Qantas had admitted as part of the settlement that it misled consumers. "Qantas' behavior was egregious and unacceptable. Many consumers will have made vacation, business and travel plans after booking a ghost flight that was canceled," Cass-Gottlieb said.
She said Qantas had also pledged "not to engage in this type of behavior in the future".
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Qantas CEO Vanessa Hudson said: "Today marks another important step forward as we work to rebuild confidence in the national carrier... we have since updated our processes and are investing in new technology across the Qantas Group to ensure ensure that this does not happen again. ".
While flight data during a monitoring period from May-July 2022 formed the basis for the initial legal allegations - a period 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 lost thousands people had unearthed more cases of customers who were sold tickets for flights that had already been canceled.
As such, Qantas has agreed to make compensation payments to 86,597 consumers who booked or were reaccommodated on a domestic or international flight between May 21, 2021 and August 26, 2023 that was scheduled to depart between May 1, 2022 and May 10, 2024 after Qantas done. already decided to cancel it.
Only those who booked flights two or more days after the cancellation decision will be compensated, with Qantas contacting eligible customers next month.
The August 26, 2023 cutoff is the date by which Qantas is confident its internal issues have been resolved so the system will no longer sell tickets for flights that have already been cancelled.
As part of the deal, Qantas has also agreed to notify customers of flight cancellations as soon as possible, up to a maximum of 48 hours after the decision to cancel the flight. It has also committed to stop selling canceled flights as soon as possible, and in any case within 24 hours of its decision to cancel. The commitment also applies to its low-cost subsidiary Jetstar.
Of affected customers, 94% flew on domestic or trans-Tasman routes, with the remainder flying on the international network. The financial blow from the fine and restructuring program would be included as an expense in the group's statutory profit and loss account for the current financial year.
Related: Qantas claims it is not selling tickets for flights, but a "bundle of rights" to defend against the 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 to 47 days, after cancellation of the flights.
The watchdog also alleged that for more than 10,000 flights scheduled in the same period in 2022, Qantas failed to notify existing ticket holders that their flights had been canceled for an average of around 18 days, and in some cases up to 48 days.
Qantas claimed in its defense against the legal action that it does not sell tickets to customers for a particular flight, but rather a "bundle of rights" that includes alternative options in the event of cancellations, as it responded to allegations that it sold tickets to thousands flights already canceled.
The airline also claimed that the sale took place as a result of its online booking system, and that informing customers that it had already canceled the flights they had booked would have caused "uncertainty and frustration" and overwhelmed its phone lines when they were all automatically notified of the cancellation. without a replacement flight being allocated.
Before the settlement, Cass-Gottlieb had said she wanted to see Qantas hit with fines of at least $250 million, twice the current record fine.
However, on Monday she said she was satisfied with the lesser sentence as it secured an early settlement, an admission of wrongdoing by Qantas and a promise to make improvements in the future, including in budget carrier Jetstar's operations.
"If we had continued and Qantas had continued to fight and defend, we would have sought several hundred million dollars in that event," she said.
In what was a compromise agreement, the ACCC agreed to drop its claim that Qantas had not charged fees for any service, while the airline dropped its defense that it only sells a bundle of rights rather than a ticket for a specific flight.
Hudson said this concession would not affect how it sells flights in the future, with the terms of sale stipulating that the date and time of departure are not part of a customer contract with the airline.
"Even the ACCC website notes that airlines cannot guarantee specific flight times on specific dates... There will always be occasions where changes to flight times or cancellations need to be made," Hudson said.
In February, Hudson announced half-year pre-tax profits of $1.25 billion in her first financial results as the airline's leader and rewarded shareholders with a $400 million buyback after a tumultuous period that saw her predecessor dethroned. The profit result was 13% lower than the record full-year profit of $2.47 billion in 2022-2023.
