Qantas flags potential airfare hikes as fuel bill bites

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Qantas Airways has told the market it may increase the price of fares if the cost of fuel remains elevated, three days after chief executive Vanessa Hudson asked for patience while she attempts to restore customer trust in the embattled business.

Qantas’ market update released on Monday morning reveals the business is currently absorbing the fuel hike – which will amount to an expected $200 million increase over the first half of the financial year – but may look to offset some of the costs through airfares if the trend continues.

Qantas boss Vanessa Hudson apologised to customers on Friday and promised to overhaul “outdated” policies.Credit: Edwina Pickles

“Any changes would look to balance the recovery of higher costs with the importance of affordable travel in an environment where fares are already elevated,” Qantas told the Australian Securities Exchange.

“The Group will continue to absorb these higher costs, but will monitor fuel prices in the weeks ahead and, if current levels are sustained, will look to adjust its settings.”

Qantas can “adjust its settings” in one of two ways: by increasing existing ticket prices on all services or lowering the number of flights, which in turn pushes up prices.

Qantas now expects its fuel bill to grow to $2.8 billion for the first half of the financial year, after wearing a 10 per cent increase this month. Overall, its fuel costs are 30 per cent higher than in May, due to higher oil prices and refiner margins coupled with the lower Australian dollar.

It’s also expecting a further $50 million impact due to foreign exchange rate changes unrelated to fuel.

Qantas boss Vanessa Hudson issued a mea culpa to customers on Friday, and gave her first interview since being unexpectedly elevated to the position two months early after the shock departure of Alan Joyce.

“We recognise Qantas has not been where it needs to be for a long time,” Hudson said last week.

“I was a part of the leadership at the time, but clearly I wasn’t the chief executive then. I am the chief executive now and what I would say is that I would like to be judged by what we do now and how we behave going forward.”

Qantas and its budget arm Jetstar expect to carry more than four million passengers over the September school holidays, an increase on last year.Credit: James Davies

Hudson unveiled a swathe of initiatives aimed at restoring customer faith in the battered business, which has had a bruising month since it announced a record underlying profit of $2.47 billion.

Qantas on Monday said it had committed $80 million in customer improvements for the financial year, an increase to the $150 million previously invested. This investment will be funded from the business’s profits.

The financial commitment will help fund its contact centre revamp, the issuance of extra frequent-flyer points, and improve its in-flight catering. Qantas also said it wants to expedite pre-announced commitments including the re-platforming of its smartphone app.

The update revealed that trading conditions for Qantas this quarter mirror the same period in 2023, meaning its recently battered reputation has not reduced demand.

Qantas and its budget arm Jetstar expect to carry more than four million passengers over the September school holidays, which includes the football finals period, on almost 35,000 flights. This is an increase from 3.7 million passengers on 28,000 services over the same period last year.

Last week Hudson said it was important for the business to never take the loyalty of passengers for granted.

When announcing the airline’s financial results while she was chief financial officer last month, Hudson endorsed Joyce’s strategy for the group and said last year’s record profit was not as good as it gets for Qantas. Qantas said it was earning margins of 18 per cent for its domestic arm and up to 12 per cent for its international division at the time.

Qantas and rival carrier Virgin Australia have been accused of deliberately cancelling slots on in-demand routes to fend off competitors in recent weeks. Multiple industry members have been directly calling out Qantas for alleged slot hoarding during the ongoing Senate select committee into bilateral air service agreements.

The most-cancelled route for Qantas is Sydney to Canberra, in which the airline cancelled close to 15 per cent of flights in August. Almost 10 per cent of flights were cancelled from Melbourne to Sydney over the month.

There are a host of reasons a flight may be cancelled such as poor weather conditions, staffing issues, Airservices Australia resourcing troubles, or other supply chain disruptions. Despite this, Qantas has been repeatedly accused of a disproportionate number of cancellations on key routes.

Canberra Airport boss Stephen Byron – who has been a vocal critic of Qantas – said he was sick of having to call the business out for their “blatant” slot hoarding and called it a “national disgrace”.

“The federal government cannot stand by and condone this any more,” Byron said while calling for Hudson to apologise for the ongoing disruptions by issuing a free flight to every customer on the Canberra to Sydney leg who has experienced a cancellation.

“She has to walk the talk, and she said she wanted to be judged by what she does. She needs to make it up to the customers.”

Qantas has long maintained that when faced with a disruption it will always choose to cancel flights on busy routes with regular flights to minimise disruption rather than cancel a flight on a route with less chance of re-accommodating passengers.

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