Qantas to pay travel agents millions for unpaid commissions

Travel agents are set to receive long-awaited payments from airline giant Qantas after the Federal Court ruled the company was in the wrong to refuse paying them commissions gained on fuel surcharges.

The decision, which was made by the full bench of the Federal Court yesterday, could have implications for airlines all over the world.

The company will now be forced to pay about $50 million to 4,500 travel agents, represented in a class action, after judges Bruce Lander, Steven Rares and Anthony Besanko said the airline should have taken fuel surcharges into account when calculating a commission payable to travel agents.

Other airlines included in the lawsuit were British Airways, Air New Zealand, Malaysia Airlines, Singapore Airlines and Cathay Pacific.

The situation originated in 2004, when Qantas decided that a base commission would be paid on the fuel surcharge component of domestic fares, but not for international flights.

However, it soon dropped surcharges for domestic flights but kept them for international flights, and has since refused to pay commission to the agents. The case began in 2006, with a now-unregistered travel agent Leonie’s Travel taking the lead.

At the time, Qantas chief executive Geoff Dixon dismissed the case as “just another day in the life of Qantas”.

Slater and Gordon partner Steven Lewis, who represented the travel agents, said the judgement is a relief.

“The court has made a very clear ruling that the fuel surcharge is part of the ticket price on which commissions must be paid,” he said in a statement. “The matter was run as a test case to establish the law as it applies to Qantas and the other airlines involved in the class action.”

“The time has now come for the airlines, which have been using the fuel surcharge to bolster the bottom line since it was introduced in 2004, to stop fighting the travel agents and resolve this major problem.

The judges ruled that “business people need to know authoritatively what their rights and obligations are”, referencing a court case in Britain where it was found international contracts obligate airlines to pay commissions on an entire fare, excluding taxes.

The bench ruled that the two parties should now appear before the original case judge to determine the exact amount of damages to be paid.

“We would remit the proceeding to the primary judge for further consideration and to make the appropriate declarations and any orders as to damages,” they ruled. “We would order Qantas to pay the appellant’s costs of the appeal.”

Qantas has told the AFR the company is “disappointed in the judgement and we now need time to examine the detail and consider our options”. SmartCompany contacted Qantas for comment, but no reply was received before publication.