Qantas (ASX:QAN) has settled its so-called ghost flights legal case with the competition regulator, the ACCC, at a cost of around $120 million.

The Commission and Qantas announced the terms of the settlement in statements on Monday morning.

In the settlement, Qantas admitted that it misled consumers by advertising tickets for tens of thousands of flights it had already decided to cancel and by cancelling thousands more flights without promptly telling ticket holders of its decision after court action by the ACCC.

The ACCC launched Federal Court action against the airline in August of last year, alleging that, between May 21, 2021, and July 7, 2022, Qantas advertised tickets for more than 8,000 cancelled flights.

It was also alleged that for more than 10,000 flights scheduled to depart in May to July 2022, Qantas did not promptly notify existing ticketholders that their flights had been cancelled.

Qantas has now admitted that its misconduct continued from May 21, 2021, until August 26, 2023, affecting tens of thousands of flights scheduled to depart between May 1, 2022, and May 10, 2024.

As part of an agreement announced on Monday, the Commission and Qantas will ask the Federal Court to impose a penalty of $100 million on Qantas for breaching the Australian Consumer Law.

Qantas has also agreed in a court-enforceable undertaking to pay about $20 million to more than 86,000 customers who were sold tickets on flights that Qantas had already decided to cancel, or in some cases who were reaccommodated on these flights after their original flights were cancelled.

Qantas will pay $225 to domestic ticketholders and $450 to international ticketholders. These payments are on top of any remedies these consumers already received from Qantas, such as alternative flights or refunds.

"We are pleased to have secured these admissions by Qantas that it misled its customers, and its agreement that a very significant penalty is required as a result of this conduct. The size of this proposed penalty is an important milestone in enforcing the Australian Consumer Law," ACCC Chair Gina Cass-Gottlieb said in Monday's statement.

"Qantas' conduct was egregious and unacceptable. Many consumers will have made holiday, business, and travel plans after booking on a phantom flight that had been cancelled."

"We expect that this penalty, if accepted by the Court, will send a strong deterrence message to other companies. Importantly, it demonstrates that we take action to ensure that companies operating in Australia communicate clearly, accurately, and honestly with their customers at all times," Ms Cass-Gottlieb said.

"We note that Qantas has also agreed not to repeat this type of conduct in the future, and to make payments as soon as possible to the thousands of consumers who purchased tickets on flights that Qantas had already decided to cancel or were re-accommodated onto these flights after their original flight was cancelled."

"We acknowledge Qantas' cooperation in ultimately deciding not to contest this case, admitting that the conduct occurred for a longer period, and seeking to resolve this early and for the benefit of consumers," Ms Cass-Gottlieb said.

Qantas has also undertaken to notify customers of cancelled flights as soon as practicable, and no more than 48 hours from deciding to cancel the flight. It has also undertaken to stop selling cancelled flights as soon as practicable, and in any event within 24 hours of its decision to cancel. The undertaking also applies to its low-cost subsidiary, Jetstar.