Qantas confronts competitive realities, adjusts route network

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Published: March 5, 2012

Qantas (QF) said it has begun to implement, and in some areas accelerate, its previously announced five-year plan to remain competitive during the “ongoing reshaping of global finances, the painful economic restructuring in Europe … the rebalancing of global economic weight to Asia … and a profound transition in the Australian economy.”

In a speech on the airline’s half-year results, CEO Alan Joyce told investors and journalists the company is facing these competitive realities and learning to adapt “if we are to prosper and enhance long-term shareholder value” (ATW Daily News, Feb. 1).

Joyce said the carrier is facing a strong competitor capacity growth into Australia and a flat inbound market, as well as a softening of demand for travel out of the UK and Europe. As a result, the carrier will terminate Singapore-Mumbai and Auckland (AKL)-Los Angeles service in May as well as service between Bangkok (BKK)/Hong Kong and London in March. It will replace its Boeing 747 Sydney (SYD)-BKK services with Airbus A330s in June, and replace A330 aircraft on the SYD-AKL route with 737-800s. It will also add A330 aircraft to its Melbourne-Perth (PER) routes as well as on certain services between SYD and PER, replacing 747s. It will retire two additional 747s this year, on top of the four scheduled to be retired this April.

QF reported an underlying profit before tax of $ 202 million for the six months ending Dec. 31, down 51.6% from the prior year’s profit before tax of $ 417 million. During the period, it recorded a financial impact of $ 194 million due to industrial action, and a $ 444 million increase in fuel costs. It has cash reserves of $ 3.3 billion, and said it is one of only two global airlines with an investment grade credit rating with both ratings agencies. It aims to reduce projected capital expenditure from $ 2.5 to $ 2.3 billion for full-year 2012, and from a projected $ 2.8 billion down to $ 2.3 billion for financial year 2013.

“With our dollar likely to stay at a sustained high value for the foreseeable future, Australia has become a very high-cost economy in which to do business,” Joyce said, adding that QF will continue to invest in the renewal of its 737 fleet.

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