Expect cheaper fares, fewer delays: Qantas chief Alan Joyce
Qantas boss Alan Joyce has defended the country’s largest airline after a turbulent period of mass delays, cancellations, soaring fares and flight turn-backs, saying the $11.5 billion carrier’s performance has improved markedly over the past five months.
Joyce said Qantas had shown month-on-month improvement since August last year following a low patch in mid-2022 when staff sick leave and labour shortages resulted in almost half of its flights running late and more than 7 per cent being cancelled, prompting the airline to apologise to travellers.
“The data now shows Qantas is back to its best. We’ve been the most on-time of the major domestic airlines for five months in a row,” Joyce said, citing industry-wide data collected by the Bureau of Infrastructure and Transport Research Economics.
Australia’s airline industry is bouncing back after taking a pandemic-related hammering that left it with widespread job losses and carrier failures, followed by a period of supply chain difficulties, lost and delayed luggage, cancellations and delays as the airlines struggled to reboot their services.
Profit margins are healthy, fares are at historic highs and jets are crammed with passengers. The flying kangaroo is expected to announce underlying pre-tax profits of between $1.35 billion and $1.45 billion in the next few weeks.
The day after Qantas issued its second profit update, nearly 1200 flight attendants voted to strike if they were not offered a better pay deal.
The boss of rival carrier Virgin’s Jayne Hrdlicka said this week that revenue has surged to $2.5 billion in the first-half, suggesting the private equity-owned airline will deliver $125 million in profits for the six months to December 31.
But the industry’s attempts to lift profit margins to combat losses from the pandemic has attracted the attention of regulators.
The Australian Competition and Consumer Commission has said average revenue per passenger was 27 per cent higher in October 2022 than in October 2019, prompting it to put Qantas, Virgin Australia, and Rex on notice.
“We would be concerned if airlines withheld capacity to keep airfares high,” ACCC commissioner Anna Brakey said.
Joyce said on-time performance during the peak summer period of December and January 2023 was 78.4 per cent, compared with 76.8 per cent in the same pre-COVID period of 2019-2020. Qantas also recorded a smaller dip in cancellations of 2.8 per cent compared with 3.1 per cent in January 2020.
“Domestically, we’re almost back to 100 per cent of pre-COVID flying levels. Internationally, we’ll be at around 80 per cent by the middle of the year and we’ve recently seen most of our competitors announce a major ramp-up in their capacity, so you can expect to see fares trend down, keeping in mind we’re all paying more for most things at the moment,” he said.
The airline chief also signalled that he expected air fares to dip as sick leave returned to normal levels and Qantas looked to gradually increase capacity. Joyce blamed fuel prices, which have risen 65 per cent compared with pre-COVID levels, rather than fewer flights, for pushing up ticket costs.
He also defended the string of flight turn-backs in January and said they were evidence of high operating standards. Qantas was forced to turn back three flights in as many days following an engine failure, a potential mechanical issue, and a potential Boeing 717 flaps issue.
“These have received a huge amount of attention because we had several in quick succession, but despite the hype, they are actually a symptom of strong safety systems,” Joyce said.
“Our pilots always err on the side of caution because that’s what we train them to do. If an onboard system isn’t working the way it should, they will often decide to land rather than pressing on to the destination. I congratulate them for doing that and encourage them to keep doing it.”
Aviation expert and University of Sydney Professor Rico Merkert said the timing of Joyce’s comments came after heightened worries about safety, and belied the chief executive’s deepening concern that it may lose valuable customers – frequent flyers and corporate travellers – to rival Virgin Australia, which is seeking to relist on the ASX.
“Maybe that’s a message to them: ‘Look guys, we’re doing everything we can to get back to normal. Stay with us a little longer and we’ll be all right’,” Merkert said.
He also believes Qantas may be looking to control capacity to improve margins and fund sustainability efforts to be carbon-neutral by 2050.
“This is the elephant in the room,” Merkert said. “They are very cautious about margins. They are not picking a fight with Virgin or anyone else at the moment with capacity wars and adding too much too quickly, because they know they’re going to need a lot of cash to renew their fleet and achieve those carbon emission goals.”
Qantas’ December half profit figures will be released on February 23.
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