Qantas agrees to $105 million settlement over Covid flight credits
Qantas Airways Limited (ASX: QAN) has reached an agreement to settle the class action over flight credits issued during Covid for $105 million, with no admission of liability. The Qantas flight credit settlement resolves allegations that the airline breached contractual obligations regarding refunds for flights cancelled between 1 January 2020 and 1 November 2022.
The class action was filed in August 2023, targeting Qantas’s handling of flight credits during the pandemic when customers were issued credits rather than cash refunds for cancelled services. The settlement is subject to approval by the Federal Court of Australia.
Under the terms of the agreement, Qantas has not admitted any wrongdoing. The settlement removes legal uncertainty that has been hanging over the company since the action was filed nearly three years ago.
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What was the Qantas flight credit class action about?
The class action centred on allegations that Qantas breached its contractual obligations when it issued flight credits instead of cash refunds for flights cancelled during the Covid-19 pandemic. The affected bookings covered a nearly three-year period from early 2020 through to late 2022, spanning the height of pandemic-related travel disruption.
Customers who received flight credits alleged they were entitled to refunds. The dispute became a focal point of broader criticism about airline practices during Covid lockdowns and border closures.
In August 2023, coinciding with the filing of the class action, Qantas removed expiry dates on Covid-related flight credits. This policy change means customers can now request a cash refund indefinitely, representing a remedial step taken before the settlement was reached.
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Financial impact and payment timeline
Qantas had previously made a provision for this matter, meaning the settlement does not represent an unexpected cost. An increase to the provision reflecting the $105 million settlement will be recognised outside of underlying earnings in H2 FY26.
The settlement amount will be paid to a Court-approved settlement administrator, with payment currently expected in H1 FY27.
| Item | Timing |
|---|---|
| Provision adjustment recognised | H2 FY26 |
| Settlement payment expected | H1 FY27 |
The non-underlying treatment ensures core operating earnings remain unaffected by the settlement. Cash outflow is deferred to FY27, preserving near-term liquidity as the airline continues to navigate post-pandemic operational recovery.
What this means for Qantas shareholders
The Qantas flight credit settlement provides certainty by removing a legal overhang that has persisted since mid-2023. The no-admission-of-liability clause protects Qantas from precedent-setting outcomes that could have broader implications for airline refund policies.
Key takeaways for investors include:
- Legal uncertainty resolved, allowing management to focus on operations rather than litigation
- No admission of liability, limiting reputational and legal precedent risks
- Provision already in place, meaning no earnings shock or unexpected balance sheet impact
- Payment deferred to H1 FY27, preserving cash flow in the current financial year
Settlements of this nature are part of broader efforts by Qantas to rebuild customer trust following Covid-related controversies. For shareholders, removing this litigation removes a potential drag on investor sentiment and allows the company to focus on operational recovery and fleet modernisation initiatives.
The settlement remains subject to Federal Court approval. Once finalised, it will draw a line under one of the more prominent legal challenges arising from the airline’s pandemic-era policies.
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