It is perhaps a measure of quite how far Qantas has fallen that news this week of legal action that could see it fined hundreds of millions of dollars brought with it an almost gleeful response from airport bosses and aviation leaders.
Indeed their delight says much about the bitterness that has developed towards the national carrier within the industry and among some of the Australian public.
Finally, it felt like Qantas had been brought back down to earth.
But many may question how it ended up like this – a national carrier which projects a warm image of homeliness and kinship reduced to being portrayed as a villain accused of deceiving its customers to achieve greater profits.
And while the outgoing CEO, Alan Joyce, may be remembered fondly by the board for cutting fat and delivering scarcely believable profits by the end of his 15 years at the helm, when he finishes in November he may well be better known for exiting with a bumper pay packet – expected to be $24m – while leaving the Qantas brand in peril.
Profit at a cost
Any high that Qantas was still riding after announcing a record $2.47bn profit seven days earlier came crashing down on Thursday morning, when the Australian Competition and Consumer Commission (ACCC) dropped its bombshell.
The watchdog had been investigating Qantas’s cancellations and had decided to take the airline to court. It alleged the airline had engaged in false, misleading or deceptive conduct in advertising and selling tickets for more than 8,000 flights between May and July 2022 that had already cancelled in its system. Put simply, the allegation was it sold seats on planes that were never going to fly.
The ACCC chair, Gina Cass-Gottlieb, later said she wanted to see Qantas hit with hundreds of millions of dollars in penalties – at least double the current record fine of $125m. She wanted to send a message that companies cannot continue knowingly breaching consumer law while factoring in potential penalties as the cost of doing business.
While the ACCC’s action focuses specifically on Qantas’s behaviour after deciding to cancel services aviation insiders were more inspired by the watchdog’s other findings.
Through its in-depth investigation of Qantas’s cancellation data, which included serving the airline with compulsory information notices, the ACCC found that during the three-month inquiry window, the airline cancelled about 15,000 out of 66,000 domestic and international services – almost one in four flights.
“These cancellations were made for a variety of reasons, including reasons within Qantas’s control, such as network optimisation, route withdrawals or retention of take off and landing slots at certain airports,” the ACCC also alleged. Cass-Gottlieb confirmed this included Sydney Airport.
To Sydney Airport’s CEO, Geoff Culbert, the ACCC’s allegations appeared to justify his long-held gripe – shared by a broad chorus in the industry and independent reviews – that Qantas and its budget carrier, Jetstar, have been strategically scheduling then cancelling domestic flights out of Sydney airport to prevent competitors from introducing rival services.
Qantas has staunchly denied it engages in the behaviour labelled “slot hoarding”, instead pointing to weather and other operational reasons for cancelling flights.
The ACCC said the alleged breaches do not relate to improper cancellation of flights.
While the ACCC’s finding didn’t go as far as suggesting a motive for Qantas’s behaviour, Culbert claimed its investigation justified calls for immediate reform to police slot misuse and introduce enforcement that “punishes misbehaviour”.
“We have been shining a spotlight on cancellations and delays for six years,” Culbert said. “These allegations provide even more justification.”
James Goodwin, CEO of the Australian Airports Association, said the ACCC’s allegations of misleading or deceptive conduct echoed “what many have been raising for some time”.
Just days before the ACCC bomb landed a fiery Senate committee into the cost of living heard from the CEO, Alan Joyce. He had been summonsed to appear after refusing requests and was grilled on everything from his eye-watering bonuses to lobbying against Qatar Airways’ expansion.
During this at times angry hearing executives staunchly denied accusations of so-called “slot hoarding”.
They explained high cancellation rates out of Sydney – almost one in 10 flights on routes to Melbourne and Canberra – as weather, air traffic and operationally related.
On Tuesday, Andrew Finch, the general counsel and group executive at Qantas, opened his appearance at a separate parliamentary inquiry by saying: “we completely reject these assertions [of slot hoarding] which are broadcast without a skerrick of evidence”.
But after the ACCC’s allegations regarding misleading or deceptive conduct, Qantas’s media response appeared far less brazen, saying it “takes these allegations by the ACCC seriously”.
It was a sombre tone compared to Qantas’s usual response to legal action. Last week, when a class action lawsuit was launched seeking interests and refunds on money held from Covid-related cancellations, its PR machine said “we completely reject these claims”.
‘They got comfortable and lost touch’
The ACCC began investigating Qantas cancellations after being inundated with complaints.
Qantas was the most complained about company in the past two financial years, the ACCC said, and 50% of those complaints last year – about 1,300 instances – were related to cancelled flights.
Consumer experts say Qantas’s reputational fall from grace has been gradual, and has occurred not only due to its focus on delivering for shareholders over customers’ experience, but the nature of Australia’s aviation market.
Qantas, together with budget carrier Jetstar, operates 66% of domestic aviation. With no dedicated ombudsman for the industry, there is little incentive for airlines to treat complaints seriously internally, and no middle ground to raise issues before the ACCC gets involved, argues Gerard Brody, the chair of the Consumers Federation of Australia and former chief executive of the Consumer Action Law Centre.
“Competition plays a really important role in driving not only prices but making businesses more responsive to customer needs and good service,” said Brody, saying little competition and a lack of consumer protection in aviation have built up “a level of distrust”.
“There isn’t a lot of love for Qantas in the community … this has been a real hit to its reputation,” Brody said of the allegations.
Tom van Laer, an associate professor of narratology at the University of Sydney, said Qantas won’t be able to easily undo the brand damage it has sustained even from the ACCC’s allegations alone.
Qantas’s attempt to trumpet an image of being highly profitable, while running advertisements showing its role in family reunions, has also led to an expectation gap, Van Laer said. “They’ve been pulling at heartstrings in their ads and making billions in profits, but then customers are hit with cancellations and bad service.”
“They got comfortable and lost touch with that gap between what they were projecting and delivering.”
“Everybody’s got a Qantas horror story now, this is not something you can fix with a slick corporate commercial,” Van Laer said.
Tony Webber, an aviation analyst and former chief economist at Qantas, says the company’s strategy in recent years appears shortsighted.
“Their focal point is value and earnings, which pleases shareholders at the expense of those who consume their product,” he says.
“They’ve had a really good balancing act between shareholders and passengers for a long time but it’s swayed a bit too much to the shareholder, and that is coming back to bite them.”
‘They play real hard ball’
If the allegations are proven, Webber said that while the airline could easily pay a fine in the hundreds of millions of dollars and still be very profitable, the executives would now be concerned about customers turning on it, and shareholder panic.
In the week to Friday afternoon, Qantas’s share price had dropped more than 6.5%, and was trading at its lowest point of the year.
“Yes $250m is a massive amount of money but there might be a deeper impact on earnings [if] the brand takes a hit.
“Management and the board will be really hurting, I know they do not like the name of Qantas being trashed,” Webber said.
Inside the industry, there is hope the ACCC’s allegations will pull Qantas back into line.
Among airports, Qantas has a reputation for being a tough negotiator over fees for landing rights, and the airline’s high cancellation rates, which some allege are strategic, have become a growing source of anger.
“They play real hard ball, they truly use their market power in a way that airports can’t, to get the result they want and flatten their costs,” one source, who requested anonymity, said.
“I think many are hoping everything that’s happened will take a bit of the brazenness off them.”
