Qantas Airways Ltd (ASX: QAN) shares hit a new 52-week high of $7.34 on Wednesday, extending gains to 20% for the past month.
But the airline is also facing scrutiny after New Zealand's Commerce Commission announced plans to file charges against Qantas' subsidiary, Jetstar. The Commerce Commission has the same role as the Australian Competition and Consumer Commission (ACCC), albeit over in New Zealand.
The Commission alleges that Jetstar misled New Zealand consumers about their rights to compensation for flight delays and cancellations within the airline's control.
While not price-sensitive, being the owner of Jetstar, this development puts Qantas shares squarely in the spotlight. Let's see.
What is the NZ Jetstar probe about
The Commerce Commission's probe centres around Jetstar's handling of customer compensation for delayed or cancelled flights on New Zealand domestic routes.
The regulator claims that Jetstar misled consumers about their rights under New Zealand's Civil Aviation Act.
This act obligates airlines to compensate passengers for losses caused by delays or cancellations within the airline's control, such as staffing or mechanical issues.
Reimbursement costs can total "up to 10 times the cost of the ticket" when factoring in meals, accommodation and other delay costs, to a maximum of NZ$11,000.
According to the Commission, Jetstar's communications likely "discouraged" consumers from seeking the compensation they were entitled to, potentially leading to the denial of legitimate claims.
In the Commission's opinion, Jetstar likely made false or misleading statements to consumers about their rights in aviation law, in 2022 and 2023.
Jetstar's website allows consumers to resubmit claims for compensation for reasonable costs from cancelled or delayed flights which may have been incorrectly handled at the time.
The Commerce Commission encourages any consumers who think they may be eligible to visit Jetstar's website.
Commerce Commission General Manager Vanessa Horne stressed the importance of consumer rights, saying, "Airlines have a responsibility to not mislead consumers about their rights in the event of cancellations or delays".
The Commission will file proceedings against Jetstar in the Auckland District Court "shortly".
Qantas shares flying high
Despite news of the NZ Jetstar probe, Qantas shares have been on an upward trajectory today, peaking at a new 52-week high of $7.34 in mid-morning trade. At the time of writing, Qantas shares are trading at 2% higher at $7.31.
The stock has risen 20% in the past month alone and currently trades at a price-to-earnings (P/E) ratio of just 9.3 times.
This suggests that investors are paying $9.30 for every $1 of the airline's profits, roughly half the P/E ratio of the broader S&P/ASX 200 Index (ASX: XJO).
Several brokers are bullish on the airline's long-term prospects as well.
UBS rates Qantas shares as a buy, with a price target of $7.50. It cites the airline's improved post-pandemic position and stronger balance sheet as reasons for the rating.
Goldman Sachs is even more optimistic, placing a price target of $8.05 on Qantas shares, implying a 10% upside.
The broker argues that the market is underestimating Qantas' improved operational performance since the COVID-19 pandemic.
Meanwhile, Morgans also rates Qantas as a buy, though with a slightly lower price target of $7 per share.
Foolish takeaway
Qantas shares have reached new heights despite the brewing legal challenges facing its subsidiary Jetstar in New Zealand.
However, nothing has changed fundamentally at this stage as a result of the prospective proceedings.
The airline stock is up 34% in the past 12months.
