Qantas shares lower on $120m profit hit

Qantas Airways Ltd (ASX: QAN) shares are edging lower on Wednesday morning.

At the time of writing, the airline operator's shares are down slightly to $9.04.

What's going on with Qantas shares today?

Investors have been selling the Flying Kangaroo's shares this morning in response to the release of an announcement after the market close on Tuesday.

That announcement relates to legal action that was taken by the Transport Workers Union (TWU) after Qantas was alleged to have illegally fired ground crew members during the COVID-19 pandemic.

The High Court would later rule in favour of the TWU in 2023. Then in October, the Federal Court ordered Qantas to pay $170,000 in compensation to three workers in test cases. This sparked fears that the flag carrier airline could face a final bill worth tens of millions of dollars.

What's the damage?

Well, after the market close yesterday, Qantas revealed that it has reached an agreement on the payment of compensation to the former ground handlers who were impacted in 2020 by the airline's decision to outsource.

Qantas has agreed a compensation package with a total value of $120 million.

The release notes that following the Federal Court's ruling in October regarding compensation for three test case employees, Qantas and the TWU have agreed to establish a compensation fund, which will be administered by Maurice Blackburn on behalf of the TWU, to pay compensation to the 1,820 impacted former employees.

The fund will be established in early 2025, from which compensation will be paid directly to the former employees.

It notes that final compensation amounts will cover both economic and non-economic loss, compensation to the TWU, as well as the costs incurred managing the distribution of the funds to individuals.

Commenting on the news, Qantas Group's CEO, Vanessa Hudson, said:

This is an important step in bringing closure to these individuals and I want to reiterate our sincere apologies to those impacted and their families. We know this has been a difficult period for those affected and are pleased we have been able to work closely with the TWU to expedite this process and resolve it ahead of Christmas.

In addition, Qantas notes that a separate hearing will be held in the near future to determine penalties relating to the matter.

The company points out that it last updated its provision for the estimated compensation and penalties from the case with its full year results in August. This provision may end up being lower than the agreed compensation package and penalties. As a result, incremental changes to the provision will be recognised in its half year results in February.

The post Qantas shares lower on $120m profit hit appeared first on The Motley Fool Australia.

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