Qantas flags cheap airfares to stimulate demand post-pandemic

Qantas has flagged ultra-cheap fares on Jetstar to stimulate travel demand when flying is able to resume.

Jetstar will offer fares from $19 once regular flying can resume, says Qantas CEO Alan Joyce. Picture: Marc Stapelberg

Qantas CEO Alan Joyce has flagged airfares as low as $19 for Melbourne to Sydney with Jetstar when domestic travel resumes in Australia after the coronavirus crisis has eased.

Delivering a third quarter trading update for the airline, Mr Joyce said Qantas remained well-placed to see out the pandemic with a cash burn low enough to ensure it could survive without flying until December 2021.

Although he could not say what “life on the other side of the crisis” would look like, Mr Joyce said he expected airfares would need to be low to stimulate demand.

“Airfares could be half of what they are today,” he said.

“For example on Melbourne-Sydney you could see Jetstar fares of $39, you could see $19 airfares and we will still cover our cash costs.”

Mr Joyce also revealed he expected to have an airline competitor in the market, and Qantas would “adapt and adjust” accordingly.

“We will adapt to whatever comes out of (the Virgin Australia) administration and I think do exceptionally well,” he said.

“There’s a reason why Qantas is the longest continuous operating airline in the world. It’s very competitive and it has the DNA to adapt to the market and the environment.”

Qantas informed the ASX it expected to burn $40m a week from late June, after payment of bills from its pre-crisis levels of flying activity and elevated levels of annual leave payments from standing down more than 25,000 employees.

The airline had sourced another loan of $550m against three of is wholly-owned Boeing 787-9s, in addition to the $1.05bn raised against seven of the aircraft in March.

Despite the airline’s solid financial position, Mr Joyce said there was no doubt that Qantas would look much different in 2021 and 2022, to how it was in 2019.

“The starting assumption has to be that the market won’t return to demand levels we had going into the crisis,” Mr Joyce said.

“We need to think about what the business needs to look like to exceed in the world – our fleet, our network and our structure – like most companies we will have to be different.”

Employees stood down at Qantas and Jetstar would remain without work through to the end of June, with flight cancellations extended until then, and international flights not expected to resume before August at the very earliest, and most probably later.

Qantas shares climbed on the back of the trading update, to be up 3 per cent at lunchtime, at $3.67.