The Qantas Airways Ltd (ASX: QAN) share price is sinking today.
Shares in the S&P/ASX 200 Index (ASX: XJO) airline stock closed Friday trading for $5.88. In early morning trade on Monday, shares are swapping hands for $5.86 apiece, down 0.3%.
For some context, the ASX 200 is up 0.4% at this same time.
Here's what's happening.
Qantas share price dips on $120 million settlement
ASX 200 investors are pressuring the Qantas share price today after the airline announced it has reached an agreement with the Australian Competition and Consumer Commission (ACCC) over misleading conduct.
Qantas admitted that it misled consumers by advertising tickets for tens of thousands of flights it had already decided to cancel. The airline also cancelled thousands more flights without promptly informing ticketholders.
The company said it will now begin to pay about $20 million to more than 86,000 impacted customers. Payments will range from $225 to $450. Those payments will be in addition to any refund or alternative flight these customers may already have received.
As part of the settlement agreement with the ACCC, Qantas will also pay a $100 million civil penalty, subject to the approval of the Federal Court of Australia.
Commenting on the settlement that is seeing the Qantas share price in the red today, ACCC Chair Gina Cass-Gottlieb said:
We are pleased to have secured these admissions by Qantas that it misled its customers, and its agreement that a very significant penalty is required as a result of this conduct. The size of this proposed penalty is an important milestone in enforcing the Australian Consumer Law.
She added that, "Qantas' conduct was egregious and unacceptable. Many consumers will have made holiday, business and travel plans after booking on a phantom flight that had been cancelled."
Contrite Qantas CEO Vanessa Hudson said, "Today represents another important step forward as we work towards restoring confidence in the national carrier."
Hudson continued:
When flying resumed after the COVID shutdown, we recognise Qantas let down customers and fell short of our own standards. We know many of our customers were affected by our failure to provide cancellation notifications in a timely manner and we are sincerely sorry.
Moving forward, Hudson said, "We have since updated our processes and are investing in new technology across the Qantas Group to ensure this doesn't happen again."
The bottom line
As for the upcoming financial impact on the Qantas share price, the company said the $120 million will be recognised as an expense in its statutory income statement for the year ending 30 June 2024 (FY 2024).
Management said the expense will be recognised as an item outside of underlying profit before tax.
Additionally, the company noted:
The timing of the cash outflow in relation to the remediation program and penalty is expected to occur after 30 June 2024 and therefore will not materially impact net debt or free cash flow for the FY 2024 financial year and will occur instead in the FY 2025 financial year.
