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Qantas CEO Alan Joyce says economy humming on all cylinders

written by australianaviation.com.au | May 2, 2018

Qantas plans to replace two Boeing 737-800s with two Airbus A320s for FIFO flights in Western Australia. (Seth Jaworski)
Qantas and Jetstar’s domestic flying has benefitted from an improving domestic economy. (Seth Jaworski)

Qantas chief executive Alan Joyce says the local economy is “humming on all cylinders” as the airline group looks set to post a double digit improvement in underling profit for the full 2017/18 financial year amid an improving resources sector and more moderate international capacity growth.
The airline group said in a trading update on Wednesday it expected underlying profit before tax (PBT) – which excludes one-off items and which it regards as the best indication of financial performance – for the 12 months to June 30 2018 to be in the range of $1.55 billion and $1.6 billion.
If the result is in line with guidance, it would represent an improvement of up between 10 and 14 per cent from underlying PBT of $1.40 billion in 2016/17.
Qantas chief executive Alan Joyce said the company was experiencing “solid results” from each of its business units, which comprise the Qantas and Jetstar domestic and international flying brands, as well as its loyalty division.
Joyce said the domestic economy in particular was doing well, with the continued recovery in the resources sector and good demand for leisure travel.
“We are dependent on all Australian businesses doing well. We are dependent on the Australian economy doing well. That’s the biggest driver of our business,” Joyce told reporters in Sydney when announcing an order for six more Boeing 787-9s.
“The reason we are doing well today is because the Australian economy is humming on all cylinders.
“Leisure is doing really well, people are travelling. And the corporate market in all sectors is doing really well. We are now for the fist time seeing real good growth in the resources sector.”
Qantas chief executive Alan Joyce at Qantas's Mascot Hangar 416.
Qantas chief executive Alan Joyce at Qantas’s Mascot Hangar 416.

That improving domestic economy helped support an eight per cent improvement in revenue per available seat kilometre (RASK), a measure of demand, across its Qantas and Jetstar operations in the three months to March 31 2018. Domestic capacity, measured by available seat kilometres (ASK), was down 1.9 per cent in the quarter, compared with the prior corresponding period.
Meanwhile, Qantas said RASK at the airline group’s international operations was up 5.2 per cent in the quarter, “driven by underlying demand growth and higher load factors”, as well as recent network adjustments including the start of Perth-London Heathrow flights and a additional flying across the Tasman due to the withdrawal of alliance partner Emirates on certain routes.
Qantas flight QF9 arrives at London Heathrow Airport after its 17-hour journey from Perth. (Qantas)
Qantas’s inaugural QF9 arrives at London Heathrow Airport after its 17-hour journey from Perth. (Qantas)

Qantas and Jetstar’s international ASKs rose 2.3 per cent in the quarter, compared with a five per cent increase in the overall international market.
Joyce said the more moderate international capacity growth from other carriers had helped support the improved RASK performance.
“Capacity is obviously a driver of where airfares go and that is actually helping as well,” Joyce said.
Also, Joyce said he expected the some short term “negative impact” from Air New Zealand’s decision to walk away from its alliance with Virgin Australia on trans-Tasman routes from October 2018.
Air New Zealand and Virgin Australia have both announced plans to add extra flights across the Tasman once their alliance ends and that capacity increase is likely to put downwards pressure on ticket prices.
More recently, Qantas has added extra flights from Brisbane, Melbourne and Sydney to Auckland, as Emirates withdrew its A380 services to New Zealand’s largest city.
The company’s market update said revenue across the airline group for the three months to March 31 2018 was $4.25 billion, up 7.5 per cent compared with the prior corresponding period.
In February, Qantas said it expected its total fuel bill for 2017/18 to be no more than $3.24 billion, compared with $3.04 billion in the prior financial year.
Looking beyond 2017/18, Qantas said on Wednesday that the end of April 2018 it had hedged about 70 per cent of its expected fuel costs for FY19 and retained “significant participation to falls in oil price”.
“In addition, ongoing transformation as well as capacity and revenue management will help mitigate the impact of higher fuel costs,” Qantas said.
In April, crude oil prices reached their highest levels since November 2014, with Brent crude oil contracts briefly breaking through US$75 per barrel. This compared with below US$30 a barrel in 2016.

Comments (9)

  • Dale


    And queue as per normal…..the Qantas haters will begin their trash talking!
    Well done Qantas – and great work Alan Joyce!

  • Rodney Marinkovic


    Only way to celebrate 100 years of QANTAS the Spirit of Australia.
    All employee and retird presonal, togheter with customers are in joy
    To see bight Australian star in comercial aviation. Australian icon,
    QANTAS Group. ????????✨??
    Rodney Marinkovic
    Home of Qantasville I.
    Kings Park, Sydney Australia

  • Marc


    Anyone can run a profitable airline when world oil prices have been at their lowest for years. If you can’t do it now, then there’s no hope next 2-3 years when big oil rises.

  • Ben


    For you to anticipate that there are going be Qantas haters seems to speak volumes. If an airline attracts haters, then logic suggests that there must be something there to hate.
    Personally I’m far from a Qantas hater. However I’m not one to just blindly applaud Qantas at every move they make. Maybe it’s because it’s a national icon, but Qantas always seems to attract great passion and feeling among the flying public. People seem to either love or hate it.
    I’m maybe one of the few fence sitters. I love what Qantas, symbolises, it’s history, heritage and it’s impressive safety record.
    However I can see Qantas has shortcomings and if the most passionate Qantas supporters were honest with themselves, they would admit that there’s room for improvement. A lot of these people seem intent on shouting down even the slightest criticism Qantas receives, as if Qantas can never do anything wrong.
    I guess I see what is good about Qantas, but I also look at what could be so much better. A lot of the customer service in my opinion is very hot and cold. It’s inconsistent and quite often insincere. I’m not saying every customer service interaction is bad. I have had quite good and very friendly customer service from Qantas, However I’ve also had some experiences that were less then mediocre and some that were just plain rude. For a full service premium carrier this in not acceptable. Consistency in customer service is achievable though – take a look at carriers like Singapore Airlines. They too are not perfect, but they’re more consistent and closer to to customer service excellence than Qantas is.
    I think Alan Joyce is a shrewd businessman but he has dragged Qantas through some very hard times to get them where they are now. I also question his passion for the Qantas heritage. Whenever he talks about it, it just seems like he’s reading off a script. I think he recognises Qantas iconic status but he only uses it for marketing, I don’t get the feeling that he’s passionate about it.
    Don’t get me started on the new livery, please bring back the paws.
    Having said that, pioneering nonstop services between Australia and Europe is commendable and if project sunrise comes to pass, it will be a true game changer.
    Qantas is headed in the right direction and that’s positive, but there’s always room for improvement..

  • Patrickk


    Marc there are quite a few airlines struggling (think Asian and ME ones) despite very low oil prices so Qantas is doing something right as well. I agree service for me is generally fine but can be a bit hit and miss. Emirates and others are courteous without being friendly, while Qantas can be mainly friendly but sometimes miss the courteous bit.

  • Rocket


    @ Ben
    Thanks, I’m a passionate supporter of Qantas and I guess accept it for good and bad points as I feel on balance it’s a great organization. I don’t mind Alan Joyce but his time will end and there have been much worse CEOs in Qantas’ history even in the days when the government owned all the shares.
    However, your post is one of the most balanced and measured I’ve read in a long time. Very, very well said. No organization is perfect and there’s always room for improvement, I’ve been lucky as my interactions have always been reasonable or excellent.
    I think you hit the nail on the head. The next CEO’s focus now that fleet and structure is settled should be customer service and innovation.

  • Ben


    @ Rocket – your words are much appreciated. Thank you for taking the time to read my post.
    I think one of Alan Joyce’s focuses has been to look at customer service. To be fair they probably have improved over recent years, however I think it needs to more consistent. He has been an effective CEO and to be a successful leader, you quite often have to have a very hard head for business and the bottom line. He certainly has that and it’s great that Qantas has got it’s mojo back since the record losses of a few years back. They certainly are headed in the right direction and I hope this continues.
    I will say again though – bring back the paws 🙂

  • David Fix


    I say Good job Alan I hope you get more 787s

  • Phil C


    What a pleasure to read Bens post .Fair ,polite and I agree 100%

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