QANTAS: AU$120 million fine and compensation for selling 'ghost' flights.

In the face of an Australian Competition and Consumer Commission (ACCC) prosecution, Qantas has admitted that it misled customers by advertising tens of thousands of ‘ghost’ flights which it had already decided to cancel. It also admitted cancelling thousands of other flights without informing ticketholders of its decision in a timely manner.

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Qantas / ACCC agreement

Qantas and the ACCC have reached an agreement to be submitted to the Federal Court to fine the airline AU$100 million for the breach of Australian Consumer Law. Further, Qantas agreed to pay AU$20 million to 86,000 customers who bought tickets on flights that had already been canceled. In some cases, it assigned tickets to customers who had already had flights cancelled.

The compensation to the ticket purchasers will be in the range of AU$225 for domestic tickets and AU$450 for international ticket purchasers. These amounts will be in addition to any other payment Qantas has already made to ticketholders, whether in cash or in kind.

“We are pleased to have secured these admissions by Qantas that it misled its customers, and its agreement that a very significant penalty is required as a result of this conduct. The size of this proposed penalty is an important milestone in enforcing the Australian Consumer Law.”

“Qantas’ conduct was egregious and unacceptable. Many consumers will have made holiday, business and travel plans after booking on a phantom flight that had been cancelled.”
ACCC Chair ,Gina Cass-Gottlieb

a woman smiling for a picture — CEO Qantas, Vanessa Hudson [Qantas]

The extent of the ‘ghost’ flights

To my mind, the most shocking admission is the extent of the consumer fraud:

“Qantas has now admitted that its misconduct continued from 21 May 2021 until 26 August 2023, affecting tens of thousands of flights scheduled to depart between 1 May 2022 and 10 May 2024.”
ACCC, 6 May media release

The original charge was for tickets advertised for more than 8,000 cancelled flights between 21 May 2021 and 7 July 2022. It turns out that Qantas has been maintaining this practice for not a little over a year as we first thought, but for more than two whole years, and for departure dates until 10 May 2024 – in a few day’s time!

an escalator and an escalator sign — Qantas eligibility signage for Lounges [Schuetz/2PAXfly]

What Qantas has agreed to

As well as the AU$100 million fine, and the AU$20 million compensation payments to affected travellers, Qantas has agreed to:

Not repeat this type of conduct
make payments as soon as possible
Notify customers of cancelled flights as soon as practicable and no more than 48 hours from a cancelling decision
To stop selling cancelled flights as soon as practical
These decisions hold fast for its low-cost subsidiary, Jetstar
To pay the ACCC a contribution towards its costs in the prosecution

You can read the full undertaking agreed to by Qantas here. If you are potentially affected, I advise you to give it a close read. It should also be noted that the Federal Court has yet to back the agreement and its terms, and this remains to be done on a date to be fixed.

What to do if you are affected

If you think you were booked on an affected flight, you may have a case for some compensation. If you do, then head over to www.qantasremediation.deloitte.com.au You can also have a look at their FAQ page.

an airplane on the tarmac — Qantas A380 bound for Singapore viewed from the Qantas Melbourne First lounge. [Schuetz/2PAXfly]

Implications for Qantas shareholders

Although the ‘ghost’ flight fine is a good whack, it is half what the ACCC head was threatening when the prosecution was initiated. Then ACCC chair Gina Cass-Gottlieb was talking about a penalty of “more than double” the record $125 million Volkswagen paid for misleading consumers about breaches of diesel emissions standards.

This can be considered a win for the new CEO, Vanessa Hudson. From July to October 2023, with Qantas still in the hands of former CEO Alan Joyce, the company’s shares crashed by 30%. Hudson has brought back 23% of that to the share price in her brief reign. She has also turned around the antagonism between the ACCC and Qantas fostered by Joyce. Remember when Qantas argued that you were purchasing a ‘bundle of rights’ rather than a ticket to somewhere?

Although AU$100 million will affect the company’s bottom line, it’s not that much in the scheme of things and will have a limited effect on the share price since the payments won’t show up until the 2025 accounts.

a woman in a pink and black uniform standing next to a row of chairs — Qantas Classic Plus rewards launch [Qantas]

2PAXfly Takeout

Hudson demonstrates that she is a new broom in management of the Qantas Group. Although she comes from an old closet cleaning supplies as a 30-year veteran of Qantas. She has settled this dispute for half what it was thought it might cost. The refresh of the loyalty scheme with the Classic Plus reward tier has been largely welcomed by frequent flyers. It is not my personal favourite initiative since I think it is a sly way of increasing the cost of awards. It has, however, answered criticisms of the rewards scheme.

Next mess is the finalisation of the compensation to the illegally sacked baggage handlers and other ground staff. Once that is done, then she will have a cleanish slate. That is if you don’t count getting the Sunrise Project done. Or refurbishing most Qantas lounges domestically. Or dealing with the balance sheet weight of all those new planes that are finally on order.