Threat of higher overseas airfares under ‘same job, same pay’, warns Qantas boss

Qantas boss Vanessa Hudson has warned the federal government’s “same job, same pay” legislation poses a threat to the airline’s international arm and could push airfares on overseas routes higher.

On Thursday, after unveiling a $1.25 billion profit for the 2024 financial year, Hudson said while domestic airfares had come off previous highs, prices for overseas travel could go up as the competitive pressure on Qantas ramps up.

Qantas boss Vanessa Hudson.Credit: Dominic Lorrimer

Qantas competes with 55 airlines internationally and has higher costs than the bulk of them, according to Hudson.

“Our international segment faces the greatest competition. It is the most exposed to external shocks such as geopolitical events and how they flow into fuel prices. Our cabin crew were already the highest paid in the country and after this legislation they will be paid triple what our Middle Eastern and Asian competitors pay.”

Qantas on Thursday said it had reached an agreement with the Flight Attendants’ Association of Australia (FAAA) to give pay rises to its short and long-haul cabin crews following the December legislation, which will cost the business an additional $60 million over the next financial year.

“Adding costs to any airline business will result in ongoing pressure on airfares, whether those costs are from same job, same pay or higher fuel prices, ultimately that will influence pricing,” Hudson said.

The Transport Workers Union (TWU) has also submitted applications on behalf of Jetstar, while the FAAA has three more claims yet to be worked through. Qantas has not factored this into its 2025 provision.

“We have to maintain a certain level of profitability because that’s core to us being able to renew the fleet and at the heart of what is good for customers and our people. It’s important for us to get that balance right,” she said.

The head of the FAAA, Teri O’Toole, said the agreement showed Qantas’ management had changed for the better, and it struck the right balance between business security and the necessary pay increases for its cabin crew.

“This is a far cry from the Qantas of just a couple of years ago, which declared open war against their cabin crew employees and held a gun to the heads of workers with applications to terminate their Enterprise Agreement,” O’Toole said.

The latest result, Hudson’s first as Qantas’ chief executive, was 28 per cent lower than 2023’s record $1.73 billion profit that kicked off a gruelling time for the battered business as customers, shareholders and staff rallied against the once-beloved brand amid widespread frustration about its customer service and fares.

Hudson said the company has been focused on restoring the brand after a torrid end to 2023, which culminated with Joyce’s departure, the loss of a High Court appeal after it illegally sacked 1700 workers, and Federal Court action following a court case lodged by the consumer watchdog.

Hudson, who has managed to resolve the bulk of the issues which plagued Qantas when she first took over in September, added that she was focused on ensuring strong operational performance, deepening the airline’s relationship with staff, unions and airports, and keeping a lid on costs.

“For me, this next year is going to be about consistency. We have to maintain a level of profitability and discipline around cost and our balance sheet strength because that’s what sustains us through the cycle of fleet renewal. Sustainability is the other focus, it’s the biggest challenge aviation has over the next decade,” she said.

Qantas’ results follow the release this week of the government’s long-awaited aviation white paper, which recommended 56 reforms for governing the sector until 2050, including a passenger charter of rights.

Qantas missed the bulk of its financial targets this year, including Qantas domestic and international, due to having to fork out $230 million in customer restoration initiatives and provisions for penalties following a settled court case with the consumer watchdog and a looming compensation penalty following the illegal sacking of 1700 ground handlers.

Its overall revenue jumped 10.7 per cent to $21.9 billion. Its operating margin fell to 10 per cent, down from 13.5 per cent in 2023.

Qantas International had been aiming for an 8 per cent earnings before interest and taxes (EBIT) margin and instead came in at 6.4 per cent, citing the return of global airline capacity and lower freight yields. Qantas and Jetstar’s combined domestic arms achieved a 14 per cent EBIT margin, falling short of its 18 per cent target.

Jetstar delivered record earnings of $497 million, but still missed analyst expectations of up to $585 million, while its loyalty division came in at $511 million, within forecasts.

Despite the missed targets, Qantas has announced a $400 million on-market share buyback and flagged it would likely return to fully franked dividends in the second half of this financial year. Hudson said she remained committed to the airline’s margin targets despite 2024’s performance.

Its net result was impacted by $198 million in legal provisions, including $128 million to settle the airline’s court case with the consumer watchdog and a $70 million increase to provide for its illegal sacking of ground handlers.

Jefferies analyst Anthony Moulder said the result was within expectations and the outlook was positive despite anticipating additional costs in 2025.

“The higher buyback level and the signal to return to fully franked dividends [in the second half of the 2025 financial year] highlights management’s confidence in the balance sheet with ongoing strength in cash flows supporting the high capital expenditure levels,” he told clients.

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