'Deceptive conduct': Qantas shares on watch after airline hauled to court

Customers allegedly out of pocket for hundreds or thousands after they were sold tickets to flights that had already been cancelled.

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Qantas Airways Limited (ASX: QAN) shares will be carefully monitored on Thursday after the consumer watchdog started legal action against the airline for alleged "false, misleading or deceptive conduct".

The Australian Competition and Consumer Commission (ACCC) revealed it has filed papers with the Federal Court of Australia on Thursday to accuse Qantas of advertising and selling tickets for more than 8,000 flights that had already been cancelled last year.

The carrier is also accused of not promptly informing existing customers that their flights had been cancelled. That allegedly occurred for more than 10,000 flights in 2022.

In the most extreme cases, flights were still on sale 47 days after cancellation and existing ticket holders were not told for 48 days.

The alleged offences happened between May and July 2022, a notoriously busy travel period after COVID-19 restrictions around Australia were removed.

Allegedly causing agony for customers

Not being told of cancellations has cost many affected customers hundreds or thousands of dollars to adjust their travel plans later.

"One consumer was provided with a replacement flight a day before their original departure date, which was communicated only by the Qantas app," stated the ACCC.

"As a result, the consumer had to change connecting flights and had a 15-hour layover in Los Angeles, which had a significant impact on the consumer and left them $600 out of pocket."

In another case, the airline allegedly sold 21 tickets for a Sydney to San Francisco flight after it was cancelled, with payment accepted a whopping 40 days after the flight did not exist.

The allegedly deceptive conduct occurred during a period when Qantas was already under fire for poor service, with the ACCC calculating that almost one in four flights were scrapped at that time.

The ACCC clarified that the problem was not with the cancellations themselves, but the conduct of Qantas afterwards.

"There are vast distances between Australia's major cities. Reliable air travel is essential for many consumers in Australia who are seeking to visit loved ones, take holidays, grow their businesses or connect with colleagues," ACCC chair Gina Cass-Gottlieb said.

"Cancelled flights can result in significant financial, logistical and emotional impacts for consumers."

In response, Qantas did not indicate whether it would fight the legal action.

"We will examine the details of the ACCC's allegations and respond to them in full in court," read the company's statement.

"It's important to note that the period examined by the ACCC between May and July 2022 was a time of unprecedented upheaval for the entire airline industry. All airlines were experiencing well-publicised issues from a very challenging restart, with ongoing border uncertainty, industry-wide staff shortages and fleet availability causing a lot of disruption."

Not a great week for the flying kangaroo

The news comes on a week when the airline has faced unprecedented scrutiny.

Longtime chief executive Alan Joyce was grilled at a senate enquiry on Monday to answer questions about its disastrous service levels while charging sky-high fares, raking in financial assistance from the government, and generating record-breaking profits.

On the same day, Assistant Treasurer Stephen Jones admitted that the federal government had blocked Qatar Airways' application for additional flights to and from Australia in order to protect Qantas.

This provoked outrage within the travel industry, economists, and former competition commissioners.

"It is hard to fathom why the government would not allow more flights into Australia at a time when fares are so high and volumes are still down on pre-COVID levels," said former federal government treasurer and Future Fund chair Peter Costello.

"The suggestion that the government somehow had a responsibility to protect [Qantas'] profit, I just can't understand."

The Qantas share price has dropped more than 7% this week in response to the controversies.

Motley Fool contributor Tony Yoo 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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