Qantas Invests $80 Million On Its Road To Redemption

After enduring weeks of negative and vitriolic press, today the Qantas Group got on the front foot by revealing its plans for a long and winding road to redemption. The announcement is formatted as an informative market update, which may be why no one is quoted in it, a seemingly lost opportunity for new CEO Vanessa Hudson to put her stamp on the way forward.

Looking to take out the pain points

The starting point to regaining public trust is an investment of AU$80 million ($53M) in customer service improvements across the financial year ending June 30th, 2024 (FY24). This investment, which is in addition to AU$150 million ($99M) previously budgeted, will be funded from the mega FY23 profits, which somewhat ironically came from when Qantas dropped the ball and lost customer confidence.

Photo: Vincenzo Pace I Simple Flying

Qantas Group, which includes low-cost subsidiary Jetstar and regional airline QantasLink, aims to remove a bevy of customer pain points, including adding more resources and training to its call centers. Qantas also said it will include more generous support when operational issues arise, review longstanding policies for fairness, improve the quality of inflight catering and increase the number of seats that can be redeemed using Frequent Flyer points.

The national airline said that travel demand remains strong, with similar trading conditions in the first quarter of FY24 to the last quarter (April-June) of FY23. Qantas and Jetstar expect to carry more than 4 million passengers over the September/October school holiday period on almost 35,000 domestic flights, compared to 3.7 million passengers and 28,000 flights last year.

Photo: John Mackintosh / Shutterstock

Several public surveys recently reported that Australians will prioritize travel over entertainment and other spending choices in the next six months. With international fares still high, the media narrative is that adding more capacity, such as extra Qatar Airways flights, will quickly push prices down. Qantas said it will increase its international capacity by 12 percentage points by the end of 2023, adding 50 weekly flights on Qantas and Jetstar international services.

This extra capacity will be possible through a mix of more new aircraft arrivals and wet leasing arrangements, such as the deal already struck with Finnair. Qantas will resume its Sydney to Shanghai services and launch new routes between Brisbane and Wellington (New Zealand) and Brisbane and Honiara (Solomon Islands), and a new Jetstar service from Brisbane to Tokyo.

Fuel prices are impacting costs and fares

Qantas Group also pointed out that fuel prices have increased by around 30% since May 2023, including a 10% spike since August. The airline explained these increases were driven by a combination of higher oil prices, higher refiner margins and a lower Australian dollar.

Photo: Ryan Fletcher / Shutterstock

Illustrating how fuel costs impact, Qantas expects the Group’s 1H24 fuel bill to increase by approximately AU$200 million ($132m) to AU$2.8 billion ($1.85b) after hedging, with a further AU$50 million ($33m) impact due to other exchange rate changes. The airline said:

“The Group will 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. 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.”

After all the hysteria of the last few weeks, it is pleasing to see a rational and coherent plan emerge from Qantas on what it intends to do about customer service and what constraints it is operating under. Let’s hope this is the first of many.