The share price of the ASX-listed Qantas Airways Limited (AU:QAN) continued its downward trajectory this week after facing legal concerns over misleading its customers. Last week, the Australian Competition and Consumer Commission (ACCC) made allegations against the airline, asserting that it advertised and sold 8,000 flights while being aware that these flights had been canceled.
The Qantas share price is experiencing a bumpy ride and has seen a 7% decrease in the past five days of trading. Today, the stock was down by almost 3% and ended the session at AU$5.65.
Qantas Airways Limited serves as Australia’s national airline and boasts the largest fleet, international flight operations, and destinations within the country.
The Legal Action
In an official statement, the ACCC has initiated a lawsuit against the company, alleging its involvement in false, misleading, and deceptive practices by marketing already-cancelled tickets.
The ACCC further contends that Qantas failed to inform existing ticket holders about the flight cancellations during the three months between May and July 2022, with an average notification delay of approximately 18 days. The regulatory authority said that the company broke the law and would be liable to pay fines, with the intent of delivering a stern message to its management.
In response, Qantas has issued an apology for not meeting its service standards and acknowledged that it was experiencing damage to its reputation.
Serious Headwinds or Temporary Setbacks
Qantas is experiencing a favorable year as the travel industry undergoes a revival and has observed increased demand this year. In the FY23 earnings report, the company posted 118% growth in its revenues of AU$19.8 billion. However, if the ACCC’s legal actions continue to attract substantial media coverage, this may persistently influence Qantas’ stock. Additionally, if the company is deemed liable, it might be compelled to pay hundreds of millions of dollars in penalties, impacting its profitability.
Is Qantas a Good Share to Buy?
According to TipRanks, QAN stock has received a Moderate Buy rating backed by six Buy and three Hold recommendations. However, these ratings were assigned before the lawsuit, considering the higher travel demand and favorable earnings reported last month.
The Qantas share price prediction is AU$7.69, which represents a growth of 36.13% from the current price level.
