Qantas has agreed to fork out $120 million to compensate baggage handlers illegally sacked at the peak of the Covid pandemic.

Qantas and the Transport Workers Union have struck a deal to set up a compensation fund worth $120 million after the airline was found to have illegally sacked the 1820 workers in 2020.

The fund will be established in early 2025 and administered by law firm Maurice Blackburn, with compensation to be paid directly to the affected former staff.

Qantas said the pool would cover both workers’ economic and non-economic loss, compensation for the union and bills stemming from distributing the funds.

Qantas chief executive Vanessa Hudson said it was an important step towards bringing closure to staff and apologised to those affected 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,” she said.

Many of the baggage handlers had worked for Qantas for decades and since endured a four-year-long court battle, union national secretary Michael Kaine said on Tuesday.

“Delivering justice to these workers is just the first step in turning Qantas around,” he said.

“But there’s still a long way to go to bring back the flying kangaroo Australians used to love.”

The airline had sought to overturn two rulings made by the Federal Court that the 2020 outsourcing of baggage handlers, cleaners and ground staff was unlawful.

It argued the decision to outsource the remainder of its ground handling function was made in August 2020, when “borders were closed, lockdowns were in place and no Covid vaccine existed”.

The carrier, then under the control of Alan Joyce, lost billions of dollars during the pandemic as it decimated the aviation sector.

The High Court unanimously dismissed Qantas’ appeal, with Federal Court Justice Michael Lee ordering it pay $170,000 in non-economic loss to cover the hurt and distress suffered by three test-case workers.

“Never again can we see Joyce-style tactics applied to wreck jobs and fight against workers receiving fair compensation,” Kaine said.

“It is encouraging new CEO Vanessa Hudson has agreed to establish a pool to ensure these workers receive justice.”

The carrier had set aside cash reserves to cover future court costs and awards, lifting it by $70 million from 2023 to 2024.

A separate Federal Court hearing will be held at a later date to determine penalties.

Qantas was ordered to pay a $100 million fine in October after admitting it misled and deceived customers by continuing to sell tickets for flights it had already cancelled and delayed notifying booked customers that their flights were no longer going ahead.

-AAP