‘You get more value with Qantas’: CEO Alan Joyce defends high airfares amid $1bn profit
Qantas chief Alan Joyce has defended the airline’s high airfares and $500 million move to reward shareholders after revealing the company had swung back to a $1 billion profit, ending years of losses as travel-hungry consumers, steeper ticket prices and sustained capacity constraints boosted its profit margins.
Joyce, who on Thursday revealed Qantas had raked in $9.9 billion in revenue in the six months to December following $7 billion in losses during the three years of the pandemic, argued that Qantas represented good value amid fierce competition in Australia’s aviation market.
“I will say Qantas does charge more than other airlines … because you get more value with Qantas in other areas, and it’s all about value. And a lot of customers will pay that extra,” he said on Thursday. “We will charge a premium.”
The airline chief earlier this month addressed fierce customer backlash over several months of mass delays and cancellations, lost luggage and poor service, and wrote in an op-ed for this masthead that those days were behind the company.
Qantas will undertake another share buyback of $500 million, which comes just after it completed a $400 million buyback in December, which Joyce said was intended to reward investors who had poured $1.4 billion in a capital raising in 2020 to help the airline recover from the pandemic, Joyce said.
“What a good company has to do is get the balance right,” he said. “The reason why you have to make returns to shareholders is because if there was ever another crisis going forward … shareholders have to know it’s a two-way street.”
It appears shareholders have received Qantas’ profit figures poorly, sending the share price down more than 6 per cent to $6.08 just after midday.
The earnings rebound came after a loss of $456 million in the previous December half. Underlying profit came in at $1.43 billion for the half, meeting the airline’s November profit estimates of $1.35 billion and $1.45 billion, which was up $150 million from previous guidance announced one month earlier.
The airline will give 20,000 employees travel credit of $500 each and bonuses of up to $11,500 in cash and shares.
Qantas’ swing back to profit was overwhelmingly driven by its domestic operations, which recorded underlying earnings of $915 million – $785 million from Qantas and $130 million from Jetstar – as the number of flights reached 94 per cent of the group’s pre-pandemic flying capacity, up from 86 per cent in the June half.
Meanwhile, international flights almost doubled from 31 per cent to 60 per cent of pre-COVID capacity in the December half, with the airline’s international arm posting underlying earnings of $511 million as it started seven new routes and reopened two. Its frequent flyer program delivered underlying earnings of $220 million and is slated to hit somewhere between $425 million to $450 million in profits for the full year.
Unfortunately for passengers, ticket fares are still 20 per cent above 2021 levels, but Qantas was keen to point to recent sales and discounts, and said it would add more flights in March.
“Cost of living is an issue across the economy at the moment, and we know airfares are part of that discussion,” Joyce said in a speech.
“Fares will keep trending down as more airlines can unlock capacity – which relies on things like supply chain for aircraft, labour availability and training pipelines.”
NSW Labor Senator Tony Sheldon, a former Transport Workers’ Union boss who has been a fierce critic of Joyce’s decision to outsource over 2000 ground handler jobs during the pandemic, said the airline’s results today were nothing to celebrate.
“The ‘Spirit of Australia’ should not be about making a sly buck at everyone else’s expense,” he said in a statement.
“There’s nothing to celebrate in Qantas making massive profits by ripping off customers with extortionate airfares during a cost-of-living crisis.”
“When the Morrison Government gave Qantas a $2 billion bailout during the pandemic, we had an opportunity to change how Qantas treats its customers and staff. Instead, by making that bailout no-strings-attached, Qantas was emboldened to take its profiteering to the extreme.”
On Thursday, Joyce dismissed the idea that Qantas’s billion-dollar half-year profits should mean that the airline should repay these funds to the government. During the pandemic, he said Qantas had spent “well over a billion dollars” on flight costs for freight, agriculture, industry and business flights it operated on behalf of the government.
“Did you provide a service? Of course you did. Would you refund the government that money? Of course you won’t,” Joyce said.
The $400 million buyback completed in December at $5.78 per share reduced the number of shares on issue by 3.7 per cent, boosting returns for remaining shareholders.
Joyce flagged earlier this week the airline’s domestic seat capacity would be back at 100 per cent by June, but said it would take until at least 2024 for its international seat capacity to recover, as carriers all over the world scramble for parts and staff. Increased capacity puts downward pressure on ticket prices, but all airlines are limited by their ability to staff and service flights.
In the 2022 financial year, Qantas reported an underlying full-year loss of $1.8 billion, with revenue up 53 per cent to $9.1 billion.
The airline unveiled a $100 million investment to transform its lounge network over the next three years on Tuesday, including a new first-class lounge at London’s Heathrow Airport and a revamp of the international business-class lounges at Hong Kong, Sydney and Melbourne.
The Transport Workers’ Union wrote to the Qantas board on Wednesday seeking an urgent meeting to discuss Joyce’s succession plan and the need to invest in the workforce in light of the group’s bullish update.
Union secretary Michael Kaine said regardless of the group’s current financial position, the next Qantas chief executive would inherit a decimated workforce and the carrier’s damaged reputation.
“It will be a difficult task to repair the damage, but it can be done if the next management team abandons the ideological attacks on the workforce and invests in skilled, experienced and highly trained workers,” Kaine said.
“Qantas customers can’t be bought by airport lounges, and the suggestion that this would repair the damage of total chaos and warfare on workers is frankly insulting to passengers and the public.”
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