Domestic capacity cut pays dividends for Qantas revenue

Qantas’s cut in domestic capacity is paying off with a bounce in revenue and a higher percentage of bums-on-seats.

Qantas increased capacity by 3.4 per cent in May compared with the corresponding period last year. Picture: Brendan Radke.

Qantas’s decision to cut back domestic capacity is paying dividends, with a bounce in revenue and a higher percentage of bums on seats across its business.

The airline’s domestic revenue per available seat kilometre (RASK) — a financial measure combining percentage of seats filled and average airfare prices — returned to growth in May, ­following falls in March and April.

Overall, the airline increased capacity by 3.4 per cent in May compared with the corresponding period last year, while group demand jumped 4.2 per cent. The airline filled 76.3 per cent of seats in May, up from 75.7 per cent last year.

Qantas’s budget airline, Jetstar, filled 81.2 per cent of seats in May, while the domestic Qantas operation — including QantasLink — increased seat loads to 74.5 per cent.

Domestic available seat kilometres fell 5.1 per cent in May from a year ago, but revenue seat factor was up 3.6 points.

For the financial year to date, group capacity increased by 4.7 per cent and demand increased by 6 per cent, resulting in a group revenue seat factor of 80.1 per cent which was 0.9 percentage points higher than last year.

Total passengers Qantas carried in May increased by 4.2 per cent to 4.01 million.

Qantas reported a 1.6 per cent increase in domestic passenger numbers in May but Jetstar booked a 0.4 per cent fall.

For the financial year, the airline flew 47.4 million passengers, an increase of 4.7 per cent on last year.

The improving operations come after Qantas announced in April it would cut capacity in the June quarter as a result of softness in demand, related to the coming federal election and a fall in consumer confidence,

“Group domestic RASK growth was restored ahead of expectations, representing a successful outcome to Qantas’s swift and rational decision to cut capacity at the early signs of demand weakness,” said analysts at Macquarie Equities Research.

“May’s stats confirm that Qantas has successfully restored domestic RASK growth, with international RASK declines in line with our expectations and reflecting new route additions as a result of asset utilisation.”

However, the performance of Qantas’s international arm softened as it brought on extra services to San Francisco, Tokyo, Hong Kong and Singapore, and Jetstar upgraded to higher-capacity Boeing 787s.

Qantas International capacity increased 8.4 per cent on the previous year. Jetstar International capacity jumped 13.2 per cent because of larger planes on Thailand and Bali routes.