By Amelia McGuire and Jessica Yun
Qantas boss Alan Joyce has said airfares would fall slightly in price as capacity returned but were likely to remain above 2019 levels for the foreseeable future.
The airline on Thursday posted a billion-dollar half-year profit and tripled its revenue to $9.9 billion in the six months to December following $7 billion in losses during the three years of the pandemic. 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.
Joyce said airfares were about 20 per cent higher than pre-COVID-19, with the airline expecting domestic capacity to fully recover by June and international capacity to remain below pre-pandemic levels until 2024 due to sustained resourcing and supply chain issues.
“Cost of living is an issue across the economy at the moment, and we know airfares are part of that discussion,” he said.
“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.”
Qantas chief executive Alan Joyce. Credit: Louise Kennerley
He also doubled down on his intention to lead the airline until at least the end of this year, his 14th as chief executive officer, and defended the airline’s refusal to pay back the financial assistance provided by the federal government over the COVID-19 pandemic.
Joyce dismissed the idea that booking a billion-dollar profit should mean that Qantas should repay the federal assistance it received to stay afloat, adding that the airline group had paid its dues through taxes as well as providing critical services over the past two years.
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 since the onset of COVID-19.
“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,” Joyce said. “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, writing in an op-ed for this masthead that those days were behind the company. More than 80 per cent of Qantas flights were on time and less than 3 per cent of services were cancelled last month, according to data from the Bureau of Infrastructure, Transport, Research, Economics.
The Transport Workers’ Union has written to the Qantas board this week 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.”
The airline’s financial results also showed that about $800 million worth of COVID-19 travel credits were yet to be redeemed as of December 31, a $200 million improvement over the six-month period. The airline said its management has led multiple initiatives including promotional offers and targeted reminders to encourage the use of the credits, the bulk of which are due to expire by the end of this calendar year.
Qantas will also reward its shareholders, who had poured $1.4 billion in a capital raising in 2020 to help the airline recover from the pandemic, through another share buyback of $500 million.
However, the latest buyback wasn’t enough to rouse shareholders, with the group’s share price sliding 7 per cent to $6.03.
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 credits 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. Joyce confirmed earlier this week the group’s domestic capacity was on track to return to 100 per cent of pre-COVID-19 levels by June.
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.
Joyce also credited a controversial $1 billion restructure, launched in the midst of the pandemic, as a driver of its return to profit, which saw the outsourcing of some operational roles and included 1,700 redundancies.
“When we restructured the business at the start of COVID, it was to make sure we could bounce back quickly when travel returned,” he said. “That’s effectively what’s happened, but it’s the strength of the demand that has driven such a strong result.”
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 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.”
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.
Qantas chief executive Alan Joyce unveiling a new cabin after the results announcement Credit: Louise Kennerley
Earlier this week, 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.
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