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Qantas Airways Shares Encounter Ongoing Turbulence Amidst Legal Woes

1 September 2023 12:21

Qantas Airways Limited (ASX: QAN) is navigating a tumultuous phase, with its share price witnessing successive drops and facing concurrent legal action by the Australian Competition and Consumer Commission (ACCC), which alleges the airline sold tickets for pre-canceled flights and delayed notifying passengers about cancellations, causing expensive eleventh-hour adjustments for travellers.

Share Price Plunge

As the trading week comes to a close, Qantas shares have endured a turbulent journey.

The Company’s share price witnessed a decline of 1.52% in early trading on Friday, currently standing at $5.82 per share. This drop follows the previous day’s closing price of $5.91 per share.

These setbacks have contributed to a cumulative share price drop of 9.4% since the prior week’s closing price, signifying a challenging period for both Qantas and its shareholders.

The timing of these issues coincides with Qantas announcing a record-breaking $2.5 million annual profit last week, prompting speculation about potential correlations between financial performance and corporate behaviour.

Legal Action by ACCC

The Australian Competition and Consumer Commission (ACCC) took significant steps to address the alleged misconduct by Qantas, with the regulatory body filing legal action against the airline, asserting that Qantas knowingly advertised and sold tickets for 8,000 flights that had already been cancelled.

Investigations revealed that Qantas continued to sell tickets for these cancelled flights for an average of two weeks, with some flights remaining available for booking for up to 47 days after cancellation on the airlines end. This extended period of selling tickets on flights that the airline knew were cancelled adds weight to the accusations of misleading and deceptive conduct.

Furthermore, the ACCC contends that passengers on 10,000 flights were not promptly informed of cancellations, for an average of 2 weeks, and in some cases, up to 48 days, compelling them to make costly last-minute changes to their travel plans.

Significant Penalties Sought

ACCC Chair Gina Cass-Gottlieb emphasised the gravity of the situation by expressing the watchdog’s intent to secure substantial penalties against Qantas.

She asserted that the penalties should be in the “hundreds of millions, not tens of millions,” in order to create a significant deterrent against similar conduct in the future.

Cass-Gottlieb’s stance indicates that the regulatory authority is committed to ensuring that such behaviour is not treated as a mere cost of doing business, but rather as a serious violation that merits substantial consequences.

Aiming for Impactful Penalties

Gina Cass-Gottlieb drew parallels with previous high-profile corporate penalties, such as the $125 million fine imposed on Volkswagen Group for misleading emission testing practices.

The ACCC’s goal is to levy a penalty on Qantas that underscores the message that such conduct will not be tolerated and that corporations must think twice before compromising customer interests.

The alleged breaches by Qantas carry a significant financial weight, with each of the 10,000 violations potentially resulting in a maximum penalty of $10 million. This accumulates to a theoretical fine of $100 billion, a substantial tenfold of the airline’s current market value.

Week of Challenges

The ongoing challenges faced by Qantas have compounded its difficulties throughout the week.

Chief Executive Alan Joyce faced criticism during a senate inquiry on Monday, and revelations regarding protection against competition from the federal assistant treasurer have further intensified scrutiny.

Additionally, the frantic response by the airline to the public backlash led to the abrupt removal of the end-of-2023 expiry on flight credits, highlighting their panic-driven efforts to appease customer concerns.

QAN’s Australian Stock Exchange-listed share price is currently trading at $5.82 (12.00pm UTC+ 8 hours).

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