Why are Qantas shares in hot water on Monday?

Qantas shares are having a turbulent start to the trading week.

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It's been a disappointing start to the trading week this Monday for the S&P/ASX 200 Index (ASX: XJO). So far today, the ASX 200 has retreated by 0.14%, pulling the index down to under 7,140 points. But let's talk about Qantas Airways Limited (ASX: QAN) shares.

The Qantas share price is faring far worse than the broader market so far this session. At the time of writing, Qantas shares are trading at $6.20 each. That's down a significant 1.2% from the $6.27 the airline closed at last week.

So what's going on with the national carrier today that might explain why Qantas shares are seemingly being singled out for punishment this Monday?

Well, it's got nothing to do with any news out of Qantas itself. That's because there hasn't been any for a while now.

But we do have another development we can point to that might explain why Qantas shares are in hot water today.

Why are Qantas shares getting whacked on Monday?

According to law firm Echo Law, Qantas is now facing a new class action lawsuit.

Echo Law has launched the class action against Qantas "on behalf of Qantas customers who held tickets for domestic or international flights cancelled due to COVID-19 travel restrictions.".

Here's how the law firm is justifying this legal action:

Qantas customers were entitled to a full cash refund for those cancelled flights. Instead, Qantas issued the majority of its customers with travel credits or vouchers, which were subject to significant restrictions and would expire if not used. Accordingly, those credits were of much lower value to customers than the refunds to which they were entitled.

By acting in this way, Qantas has enjoyed significant financial benefits at its customers' expense.

We consider that affected Qantas customers are entitled to compensation, even if they have used the credits they were issued.

Echo is alleging that Qantas "breached" its contracts with customers and "engaged in misleading or deceptive conduct in contravention of the Australian Consumer Law". That's in addition to "unlawfully benefited from customers" and "engaged in unconscionable conduct".

It is inviting any Qantas customer that had a Qantas flight cancelled as a result of the pandemic to participate in this class action. Echo is also apparently exploring similar actions against Qantas subsidiary Jetstar as well.

We haven't heard a peep out of Qantas in response to this potential legal action, either through an ASX announcement or a traditional media release. But investors are clearly worried that this development might be a drag on Qantas' fortunes going forward. Let's see what eventually comes of it.

In the meantime, Qantas shares are still having a decent year, despite today's share price drop. The Qantas share price remains up by 3.7% in 2023 to date. As well as up a rosy 33.6% over the past 12 months. However, the ASX 200 travel stock has also lost a meaty 7.9% since 24 July, as you can see below:

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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