The Federal Court has confirmed $100m in penalties over the so-called “ghost flights” scandal.
The court ordered Qantas (ASX:QAN) to pay the penalties for misleading consumers by offering and selling tickets for flights it had already decided to cancel, and by failing to promptly tell existing ticket-holders of its decision.
These penalties were imposed after Qantas admitted it had contravened the Australian Consumer Law (ACL). The company agreed to make joint submissions with the ACCC to the court that $100m in penalties were appropriate to deter Qantas and other businesses from breaching the ACL in the future, while recognising Qantas’ cooperation in resolving the proceedings at an early stage.
“This is a substantial penalty, which sets a strong signal to all businesses, big or small, that they will face serious consequences if they mislead their customers,” ACCC Chair Gina Cass-Gottlieb said.
On 5 May, in addition to these penalties, Qantas gave an undertaking to the ACCC that it would pay about $20m to consumers who purchased tickets on flights that Qantas had already decided to cancel, or in some cases who were re-accommodated on those flights after their original flights were cancelled.
These payments are on top of any remedies these consumers already received from Qantas, such as alternative flights or refunds.
“We all know the inconvenience of cancelled flights. When this happens, consumers need to know about the cancellation as soon as possible, so they can work out alternative arrangements which suit them.”
“Up to about 880,000 consumers were affected by Qantas’ conduct. People had made plans, and may have spent money on other related purchases, relying on the fact that the flight would depart as advertised. And the delay in notifying them of the cancellation may have made it more stressful and costly to make alternative arrangements,” Ms Cass-Gottlieb said.
In Tuesday’s statement, Qantas admitted that senior managers responsible for different aspects of Qantas’ systems and operations between them knew: that cancelled flights were not immediately removed from sale; that some consumers booked tickets for flights that had already been cancelled; that existing ticketholders were not immediately notified; and that the “Manage Booking” pages were not promptly updated when flights were cancelled.
Qantas also admitted that it benefited from the conduct by obtaining revenue from consumers who may have chosen a cheaper Qantas flight or a flight with another carrier had they known their chosen flight had already been cancelled.
“Qantas also benefited by retaining revenue from consumers who were less likely to change carrier when they were eventually notified their flight had been cancelled. In addition, by delaying fixing its systems, Qantas saved the costs of doing so at an earlier point in time,” the ACCC said.
Qantas shares ended up 1.13% at $7.13 on the ASX on Tuesday.