Fancy $100 million dollar lounges, free high-speed WiFi, new business class suites—the Qantas Group (ASX: QAN) is flexing every muscle to bring customers back after a three-year lull.
It looks like it’s working.
Even as airfares have increased by about 20%, people are on a post-Covid travel high, helping Qantas rake in the dough. In H1 FY23, the Company earned $1.43 billion in profits, 49% higher than the first-half record result achieved in FY18. Its statutory profit stood at $1 billion.
The results were driven by strong travel demand, higher yields and cost improvements from Qantas’s $1 billion recovery program. The total operating margin was 16 per cent and came despite significantly higher fuel prices. The Company’s international earnings increased to $511 million as the flight capacity doubled to 60% in H1 FY23. Two routes were re-opened, and seven new routes were started.
Qantas Group CEO Alan Joyce said, “This is a huge turnaround considering the massive losses we were facing just 12 months ago. When we restructured the business at the start of COVID, it was to make sure we could bounce back quickly when travel returned. That’s effectively what’s happened, but it’s the strength of the demand that has driven such a strong result.”
Qantas put $200 million into operational resilience to bring back its glory days. This comprises holding some aircraft in reserve and rostering more backup crew, significantly improving customer operational performance. Its strong financials mean that Qantas can reinvest the money in improving its fleet and customer and employee experience.
“Returning to profit means we can get back to reinvesting for our customers, which is clear from the network, fleet and lounge announcements we’ve made, and from the Project Sunrise cabins we’re previewing. Importantly for our investors, this also sets us up to deliver long-term shareholder value,” Joyce noted.
The Company’s earnings shot up to $915 million as flying increased from 86% of pre-COVID capacity in 2H22 to 94% during the half. Qantas’ domestic operations delivered $785 million, and Jetstar’s $130 million, with margins of 22 per cent and 11 per cent, respectively.
People travelled for leisure, boosting demand that drove recovery. Corporate and SME travel demand remained strong as fuel prices rose and tickets became more expensive. However, that didn’t deter Qantas from reimagining its marketing strategy.
Joyce added, “Fares have risen because of higher fuel costs, but also because supply chain and resourcing issues meant capacity hasn’t kept up with demand. Now those challenges are starting to unwind, we can add more capacity and that will put downward pressure on fares.”
In FY23 and FY24, Qantas expects travel demand will remain strong. Its domestic capacity will increase from 94% to 103% come H2 FY23. Similarly, its international capacity will increase from 60% to 81%. Though fares will still remain around their current prices, the Company expects them to moderate as flight capacities increase.
A ray of hope after accumulating millions in losses during Covid, Qantas is counting on luxurious experiences and more routes and seats to bring customers back. Hopefully, it will also erase customers’ memories of its recent controversies surrounding cancelled flights, lost luggage, employees being laid off and disappointing customer service.
Alinda is a Business Reporter for The Sentiment
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