QAN
Qantas Airways Limited
ASX
AXX:QANagrees to$20m payments,$100m penalty subject to court
Sentiment:
Media Release
5 May 2024 6:03 PM
Qantas will pay $20 million to customers and faces a $100 million penalty for misleading consumers about cancelled flights, according to an agreement with the ACCC.
Worse than expected
Qantas admitted to misleading conduct over a longer period than initially alleged, resulting in a larger number of affected customers and a potentially significant financial penalty.
Delay expected
Qantas did not promptly notify existing ticketholders that their flights had been cancelled.
Summary
- Qantas has admitted to misleading consumers by advertising tickets for flights it had already decided to cancel.
- The ACCC and Qantas have reached an agreement where Qantas will pay $20 million to affected customers and potentially a $100 million penalty, subject to court approval.
- The ACCC initiated Federal Court action against Qantas in August 2023.
- The misconduct occurred between 21 May 2021 and 26 August 2023, affecting flights scheduled between 1 May 2022 and 10 May 2024.
- Qantas will pay $225 to domestic ticketholders and $450 to international ticketholders.
- These payments are in addition to any prior remedies like alternative flights or refunds.
- Qantas has agreed not to repeat this conduct and will notify customers of cancellations within 48 hours and cease selling cancelled flights within 24 hours.
- Deloitte Australia will administer the payments to consumers via an online portal.
Sentiment
Score: 3
Explanation: The sentiment is negative due to the admission of misleading conduct, the financial penalty, and the reputational damage to Qantas. However, the cooperation of Qantas and the resolution for affected customers provide a slight offset.
Positives
- Qantas has admitted to the misconduct and is cooperating with the ACCC to resolve the issue.
- Affected customers will receive payments of $225 (domestic) or $450 (international) in addition to any previous remedies.
- Qantas has agreed to improve its communication practices regarding flight cancellations.
- The ACCC has secured admissions from Qantas and a significant proposed penalty, demonstrating enforcement of consumer law.
Negatives
- Qantas misled consumers by advertising tickets for flights it had already decided to cancel.
- The misconduct continued for an extended period, from 21 May 2021 to 26 August 2023.
- Tens of thousands of flights were affected, impacting a large number of customers.
- The ACCC had to launch Federal Court action against Qantas to address the issue.
Risks
- The Federal Court must approve the proposed $100 million penalty.
- Scammers may attempt to exploit the situation by posing as Qantas or Deloitte representatives.
- Qantas needs to ensure compliance with the undertaking to avoid future penalties.
- Reputational damage to the Qantas brand due to the misleading conduct.
Future Outlook
Qantas has undertaken not to repeat this type of conduct in the future and will improve its communication practices regarding flight cancellations. The Federal Court will determine the penalty amount at a future hearing.
Management Comments
- ACCC Chair Gina Cass-Gottlieb stated that the proposed penalty is an important milestone in enforcing the Australian Consumer Law.
- Ms Cass-Gottlieb noted Qantas's cooperation in resolving the matter and seeking to benefit consumers.
Industry Context
This announcement highlights the importance of accurate and transparent communication with consumers in the airline industry. It also underscores the ACCC's role in enforcing consumer law and holding companies accountable for misleading conduct.
Comparison to Industry Standards
- Other airlines, such as Virgin Australia and Regional Express (Rex), are likely to be scrutinised more closely regarding their flight cancellation policies and communication practices.
- Globally, airlines like United Airlines and British Airways have faced similar scrutiny over flight disruptions and customer service issues.
- The proposed $100 million penalty is significant compared to other consumer law penalties in Australia, potentially setting a new benchmark for such cases.
Stakeholder Impact
- Shareholders will be negatively impacted by the potential $100 million penalty and the reputational damage.
- Employees may face increased scrutiny and training to ensure compliance with consumer law.
- Customers will receive compensation for the misleading conduct, but their trust in Qantas may be diminished.
- Suppliers may be indirectly affected by any financial constraints resulting from the penalty.
- Creditors may be concerned about the financial implications of the penalty.
Next Steps
- The Federal Court will hold a hearing to determine the penalty amount.
- Qantas will implement the payment scheme to compensate affected customers.
- Deloitte Australia will administer the payments to consumers via an online portal.
- The ACCC will monitor Qantas's compliance with the undertaking.
Key Dates
- 21 May 2021: Start date of Qantas's misleading conduct.
- 1 May 2022: Start date of affected flights.
- 7 July 2022: Date within the period Qantas allegedly did not promptly notify ticketholders of cancelled flights.
- August 2023: ACCC launched Federal Court action against Qantas.
- 26 August 2023: End date of Qantas's misleading conduct.
- 10 May 2024: End date of affected flights.
- 6 May 2024: Date of media release regarding Qantas agreement with ACCC.
Keywords
QAN
Qantas Airways Limited
ASX
Sector: Transportation
Filings with Classifications
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Delay expected
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Better than expected
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Half Year Results
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Delay expected
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Half Year Results
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Worse than expected
11 September 2024 7:57 PM
Annual Report
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Delay expected
11 September 2024 7:57 PM
Annual Report
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Capital raise
11 September 2024 7:57 PM
Annual Report
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Worse than expected
7 August 2024 6:38 PM
Update on Executive Remuneration
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Delay expected
5 May 2024 6:03 PM
Media Release
- Qantas did not promptly notify existing ticketholders that their flights had been cancelled.
Worse than expected
5 May 2024 6:03 PM
Media Release
- Qantas admitted to misleading conduct over a longer period than initially alleged, resulting in a larger number of affected customers and a potentially significant financial penalty.
Worse than expected
5 May 2024 6:00 PM
Settlement Announcement
- The document indicates worse than expected results due to the $100 million civil penalty and $20 million remediation program, stemming from issues with flight cancellation processes.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.