Qantas has buckled over $470 million in flight credits owed to stranded passengers, agreeing to scrap a looming expiry date.

The backdown on Thursday came amid more strife for the airline, with the consumer watchdog launching legal action accusing it of advertising tickets for 8000 “ghost flights”.

The Australian Competition and Consumer Commission has taken the national carrier to the Federal Court claiming Qantas engaged in false, misleading or deceptive conduct after continuing to sell tickets on thousands of cancelled flights for more than two weeks – and sometimes as long as 47 days.

The ACCC also alleges Qantas failed to notify existing ticket holders for 10,000 flights that they had been cancelled for an average of 18 days, and up to 48 days, between May and July 2022.

This left customers less time to make alternative arrangements and may have led them to pay higher prices.

The ACCC said Qantas continued to sell tickets for the flights on its website for two days or more and delayed informing ticket-holders their flights were cancelled for the same period of time for about 70 per cent of cancelled flights.

Qantas cancelled a quarter of its flights between May and July 2022, which amounted to about 15,000, the watchdog said.

Chair Gina Cass-Gottlieb said the commission had conducted a detailed investigation into the airline.

“As a result, we have commenced these proceedings alleging that Qantas continued selling tickets for thousands of cancelled flights, likely affecting the travel plans of tens of thousands of people,” she said.

“This case does not involve any alleged breach in relation to the actual cancellation of flights, but rather relates to Qantas’ conduct after it had cancelled the flights.”

The ACCC is seeking penalties, injunctions, declarations and costs.

Qantas said in a statement it took the allegations seriously.

“We have a longstanding approach to managing cancellations for flights, with a focus on providing customers with rebooking options or refunds,” it said.

“It’s a process that is consistent with common practice at many other airlines.”

It noted the period examined by the ACCC was a “time of unprecedented upheaval for the entire airline industry”.

“We will examine the details of the ACCC’s allegations and respond to them in full in court,” the airline said.

Treasurer Jim Chalmers said they were “deeply concerning allegations”.

Elsewhere, there were multiple reports on Thursday that Qantas had backed down on pocketing hundreds of millions of dollars owed to customers left stranded by COVID cancellations.

Outgoing Qantas boss Alan Joyce revealed to a Senate hearing earlier this week that the national carrier still owes customers at least $470 million for unused flights, several years after its controversial flight credit scheme began.

Mr Joyce, who had repeatedly said Qantas owed $370 million in credits, admitted under tense questioning that a further $100 million was also owed to Jetstar customers. The airline group also owes international passengers a further, still undisclosed, sum.

Remaining flight credits had been due to expire at the end of the year, even if they had not been claimed by flyers who had their trips cancelled during COVID lockdowns.

That revelation led to accusations that Qantas, which unveiled a record profit of $2.47 billion last week, had enriched itself at the expense of its customers.

On Thursday, the airline said it would scrap the expiry date following a public backlash. The airline said it would also double frequent flyer points from flights booked between September 4 and December 31.

Qantas COVID credits can’t be converted to travel bookings after this time.

But Mr Joyce said COVID credits could be swapped for a cash refund at any time, and Jetstar ones would be extended indefinitely.

He said he hoped the move would help change the fact that people had lost faith in the airline’s processes.

“We’re doing this because we listened – we know the credit system wasn’t as smooth as it should have been,” he said in a video statement on Thursday.

-with AAP