The Qantas Airways Limited (ASX: QAN) share price has underperformed the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) today on news that they had to sign an enforceable undertaking with our consumer watchdog for unfair refund policies.
Qantas-owned budget carrier Jetstar also had to pay fines of nearly $2 million for misleading consumers about their rights, according to the Sydney Morning Herald.
The Qantas share price eke out a 0.2% gain to $5.50 although that is has been left behind by the 1% rally on the S&P/ASX 200 and the 1.9% jump by Sydney Airport Holdings Pty Ltd (ASX: SYD).
The Australian Competition and Consumer Commission (ACCC) had taken the major airlines to court for lying to customers about refunds when a flight was delayed or cancelled.
"No matter how cheap the fares are, airlines cannot make blanket statements to consumers that flights are non-refundable," ACCC Chair Rod Sims said.
Jetstar has also been pulled out by the ACCC for stating in its terms and conditions that Australian Consumer Law doesn't apply to some of their flights even though Services such as flights come with automatic consumer guarantees that cannot be excluded, restricted or modified.
While all the major airlines have been caught doing the wrong thing, including Virgin Australia Holdings Ltd (ASX: VAH), the ACCC said that Jetstar flew closest to the sun in terms of violating Australian consumer law.
Jetstar's website claims that customers can only get a refund if they bought the more expensive tickets and that standard consumer rights did not apply to its flights.
Qantas owns 100% of Jetstar and it may not be any less guilty of unfair practices. Our national carrier agreed that it might have misled consumers into thinking they could not get a refund on "Red e-deal" fares and that consumer law guarantees did not apply to its flights, according to the SMH.
The airlines have agreed to amend their refund policies as part of the enforceable undertaking with the ACCC, but there is a risk that more draconian regulations may be imposed on the sector given the political climate we are in.
We have already seen an unprecedented level of regulatory scrutiny (at least in recent memory) on a range of industries.
Regulatory risks have already impacted financial institutions like Commonwealth Bank of Australia (ASX: CBA) share price and AMP Limited (ASX: AMP) share price, infrastructure asset owners like the Sydney Airport share price and Transurban Group (ASX: TCL) share price, and power companies like AGL Energy Limited (ASX: AGL) share price and Origin Energy Ltd (ASX: ORG) share price.
