Weak Qantas demand trends continue in April

Qantas has halted a slide in domestic profitability but seen no lift in demand since cutting capacity forecasts.

Qantas’s weak trends continued in April.

Qantas has seen no improvement in demand since cutting capacity guidance last month, although the airline has managed to arrest the slide in a crucial measure of profitability, albeit only in its core domestic business.

The national carrier (QAN) released its official April numbers this morning, noting domestic group revenue per available seat kilometre (RASK) — a key profitability and efficiency measure — had slid for the second straight month.

Crucially, domestic RASK is now flat through the financial year to date, after showing a positive number through the first nine months of the year.

Qantas said the weak trends that led to disappointing results through March and April had not abated, but its capacity cutbacks had shown signs of improving profitability domestically since April.

“Group domestic RASK was lower in April, in line with previous commentary on the disconnect in the timing of Easter and school holidays and demand softness related to the upcoming federal election in Australia,” Qantas said.

“However, due to the action taken to reduce group domestic capacity in the fourth quarter of financial year 2016, the negative domestic RASK trend was arrested in April, with improved trends through May and into forward bookings for June,” Qantas said in a statement.

The firm said domestic capacity — which includes both the Qantas and Jetstar brands — had been reined in by 0.5 per cent on the month.

In contrast, Qantas International capacity rose by 5.4 per cent, reflecting recently added services to San Francisco, Tokyo, Hong Kong and Singapore, while Jetstar International capacity jumped 13.6 per cent in the month due to the higher seat count of the B787 Dreamliner aircraft.

International RASK was down again, however, owing to discounting on US and UK routes and as Jetstar International sought to fill its new seats.

With the airline’s international RASK holding lower, the broader group’s key profitability and efficiency measure is down on the prior year.

The commentary comes after Qantas shares tumbled last month when it informed the market a lack of demand had forced a sharp cut to its domestic capacity guidance through June quarter.

The group’s shares lost 11 per cent in the immediate aftermath and have slumped a further 17 per cent since.