Qantas has agreed to pay $120 million in compensation to over 1800 staff it illegally sacked during the pandemic, marking a costly end to a long-running dispute.

The agreement was reached following mediation with the Transport Workers Union, which first brought the case against the airline in 2020. In a statement after market close on Tuesday, Qantas said it had established a compensation fund to pay the 1820 former ground handlers.

“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,” Qantas chief executive Vanessa Hudson said in the statement.

“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.”

The fund, which will be administered by law firm Maurice Blackburn, will be established in early 2025. The compensation will be paid directly to the former employees, with the final amount consisting of payments for economic and non-economic losses, along with compensation to the TWU.

TWU national secretary Michael Kaine said it was a momentous day for the workers who had been unnecessarily subjected to a “gruelling” four-year-long court battle.

“Soon these brave men and women will receive long-awaited compensation in accordance with the principles set out in the court’s decision,” Kaine said.

“These workers helped build the Spirit of Australia. Many worked decades, proud to play their part in delivering the safety and service standards that made Qantas a national icon.”

“Delivering justice to these workers is just the first step in turning Qantas around – but there’s still a long way to go to bring back the flying kangaroo Australians used to love,” Kaine said.