QANTAS: Market update previews fare boost for fuel price rise, strong demand. Offers AU$80m passenger improvements

Qantas has issued a strange market update. It leads with passenger improvements including a year-on-year increase in demand due to school holidays and football finals. The update shows that survey data indicates continued increased demand for travel in the first half of 2024. It then details a 30% increase in fuel prices, which it has ‘absorbed’. Indications are that this fuel increase will continue. The paragraph implies that this could mean either sustained high fares or fare increases.

The airline expects to increase flights by 12%, with 50 additional weekly flights by year’s end. This increase is largely about the introduction of new routes. Finally, the airline is 10% into its latest share buyback of up to AU$500 million and will speak permission at the next AGM to buy-back even more.

Passenger improvements

The update previews more passenger improvements, over and above the AU$150 million already announced. But is sketchy on detail. It announces AU$80 million to be spent on customer ‘pain points’. These include more and better-trained staff at call centres. Didn’t Alan Joyce already announce that?

More redemption seats

We are also promised more frequent flyer point redemption seats. In fact, I just received an email marketing piece detailing additional Economy Classic Flight Reward seats to destinations such as the USA, Japan, China, Hong Kong, Korea, New Zealand and the Pacific Islands.

That’s all good, but customers crave premium seat redemptions. Again, isn’t this a re-announcement of a promise already made?

Improved customer service

Remember when Alan Joyce closed a bunch of service desks at airports, causing bulk complaints from passengers? Well, it sounds like that decision might get reversed. Qantas promises to provide ‘more generous recovery support when operational issues arise.’ As one of my regular readers pointed out recently, it has already provided a more automated re-scheduling system for cancelled flights via the Qantas App. Less time on hold to a call centre or waiting at a service desk if you can find one.

It also promises ‘a review of longstanding policies for fairness’, which is intriguing in its ambiguity. I wonder if this is about forms of discrimination or handing some more autonomy back to customer-facing staff.

Better catering

Catering is also a focus for improvement. This is not before time, as Qantas food and beverage has been sinking for some time, whether onboard or in the lounges, and across classes.

Qantas app

Finally, it is accelerating some previously commenced initiatives, like the ‘re-platforming’ – which I hope is code for ‘improving’ the Qantas app. We already know they are going to match the Virgin Australia innovation of allowing passengers to track luggage. Tantalisingly, it offers updates over the next few weeks.

Demand, fares and fuel

Demand for airtravel with Qantas remains high according to this market update, partly due to school holidays and the demands of football finals. The airline is also forecasting based on research, that travel is still high on the priority list of many Qantas frequent flyers. Patronage has risen from 3.7 million same four week period last year, to over 4 million this year. Sevices have also risen from 28,000 to 35,000.

Fuel prices have increased by 30% over the last six months, which Qantas has absorbed. Given sky-high airfares, they can afford to. Exchange rates haven’t helped either. While committing to continue to absorb the increase, Qantas also foreshadows:

“This is driven by a combination of higher oil prices, higher refiner margins and a lower Australian dollar.”

“If sustained, this is expected to see the Group’s 1H24 fuel bill increase by approximately $200 million to $2.8 billion after hedging. A further $50 million impact is expected due to non-fuel related foreign exchange changes.”

Shorthand for that is, expect fare increases, or as Qantas says it will “look to adjust its settings”

More seats and more routes

Jetstar and Qantas are expecting to increase capacity by 12% by the end of 2023. That’s 50 flights per week as announced in this market update. Some are on new routes with the resumption of Sydney to Shanghai. But there are some new routes including Brisbane to Wellington NZ and Brisbane to Honiara in the Solomon Islands. Jetstar is also set to fly between Brisbane and Tokyo.

There is also the already announced wet leasing arrangement with Finnair.

What it doesn’t say

The update is silent on a couple of things. First up, it doesn’t mention the potential fines for sacking 1700 ground workers during the pandemic that has been confirmed by the High Court as illegal. Neither does it account for the costly decision to eliminate the expiry date on about AU$570 million of travel credits

2PAXfly Takeout

I’m inclined to say ‘nothing to see here’ with this market update. Most of this we already know. However, there are some tantalising details here. The details of fuel prices are disturbing if you are concerned with the cost of fares. The commitment to improved catering is welcome. New routes and frequencies are always welcome, as are more redemption seats.

What the statement fails to give is any timeline for these improvements. It’s also silent on things like Lounge refurbishments and availability of premium redemption seats. It doesn’t update us on major initiatives like Project Sunrise, or the delivery schedule for new aircraft either. Perhaps there will be more announcements at the AGM in November.