Qantas is on course for a remarkable post-pandemic recovery and is now targeting an underlying profit before tax of up to $1.3 billion in the first half of the current financial year.
The result comes despite the wider group recording an underlying loss before tax of $1.86 billion in its last full-year results and claiming the pandemic cost its airlines $7 billion in total.
Qantas appears to be taking advantage of pent-up demand for domestic travel, and now believes its revenue for leisure travel is at more than 130 per cent of pre-pandemic levels.
It added yields from international markets are “particularly strong” but warned that will moderate as its rivals increase capacity.
“The broader operating environment remains complex with high fuel prices and high inflation, as well as higher interest rates impacting on consumer confidence,” said the company in a market update on Thursday.
“However, robust demand indicates that people are prioritising spending on travel above other categories, which supports the Group’s ability to fully recover higher fuel costs through fares.
“Fuel prices are now around 75 per cent higher than pre-COVID, compared with around 60 per cent in August 2022.
“Group International capacity is now expected to increase from 61 per cent of pre-COVID levels in first half of FY23 to 77 per cent in the second half.
“This is largely determined by the ability to return additional A380s from storage and required maintenance, as well as the delivery of three new Boeing 787-9 Dreamliners for Qantas International and additional Airbus A321LRs for Jetstar.
“Group domestic capacity will be 94 per cent of pre-COVID levels for 1H23, growing to around 100 per cent for the second half – which is six percentage points below previous capacity guidance. This reduction is designed to protect the sustained improvement in operational performance as the broader industry recovers.”
Qantas said it would invest in extra staff to act as a “buffer” to the challenges posed by pandemic sick leave and supply chain delays for its aircraft parts.
“This further $200 million investment for the remainder of FY23 involves rostering additional crew, training of new recruits and overtime in key areas such as contact centres.
It also involves a conservative approach to scheduling that means around 20 per cent of the Group’s flying capacity will be left in reserve and can be called upon to reduce delays and cancellations.
“This includes up to 10 narrow-body, six wide-body and four regional aircraft on standby across Qantas and Jetstar. This capacity can be gradually added back as certainty improves and the additional cost is expected to be similarly temporary.”
It comes after Qantas chairman Richard Goyder in September said Alan Joyce and his executive team have done “exceptionally well” in a strongly-worded riposte to the CEO’s critics.
Writing in The Australian Financial Review, Goyder hailed his senior staff for steering the airline through a pandemic that “sent other airlines and their creditors packing”.
He said Qantas is now well on its way to fixing its problems, quipping, “If you haven’t heard this, it may be because the data showing the improvement received far less media attention than stories showing how bad things got.
“In the meantime, the corporate obituary writers have been busy. Their analysis has (mostly) been unencumbered by what’s happening at other airlines, or that Qantas’ performance has turned around.”
In 2022, Qantas has faced a string of problems, including huge delays at Easter, hours-long call wait times, and even a revelation that the cabin crew of a Qantas A330 were made to sleep across seats in economy.
Last year, the Federal Court ruled the Flying Kangaroo was wrong to outsource 2,000 ground handling roles and subsequently rejected an initial appeal.