‘You get more value with Qantas’: CEO Alan Joyce defends high airfares amid $1b profit

The airline chief earlier this month addressed fierce customer backlash over several months of mass delays and cancellations, lost luggage and poor service, and wrote in an op-ed for this masthead that those days were behind the company. More than 80 per cent of Qantas flights were on time and less than 3 per cent of services were cancelled last month, according to data from the Bureau of Infrastructure, Transport, Research, Economics.

The Transport Workers’ Union has written to the Qantas board this week seeking an urgent meeting to discuss Joyce’s succession plan and the need to invest in the workforce in light of the group’s bullish update.

Union secretary Michael Kaine said regardless of the group’s current financial position, the next Qantas chief executive would inherit a decimated workforce and the carrier’s damaged reputation.

“It will be a difficult task to repair the damage, but it can be done if the next management team abandons the ideological attacks on the workforce and invests in skilled, experienced and highly trained workers,” Kaine said.

“Qantas customers can’t be bought by airport lounges, and the suggestion that this would repair the damage of total chaos and warfare on workers is frankly insulting to passengers and the public.”

The airline’s financial results also showed that about $800 million worth of COVID-19 travel credits were yet to be redeemed as of December 31, a $200 million improvement over the six-month period. The airline said its management has led multiple initiatives including promotional offers and targeted reminders to encourage the use of the credits, the bulk of which are due to expire by the end of this calendar year.

Qantas will also reward its shareholders, who had poured $1.4 billion in a capital raising in 2020 to help the airline recover from the pandemic, through another share buyback of $500 million.

“What a good company has to do is get the balance right,” he said. “The reason why you have to make returns to shareholders is because if there was ever another crisis going forward … shareholders have to know it’s a two-way street.”

However, the latest buyback wasn’t enough to rouse shareholders, with the group’s share price sliding 7 per cent to $6.03.

The earnings rebound came after a loss of $456 million in the previous December half. Underlying profit came in at $1.43 billion for the half, meeting the airline’s November profit estimates of $1.35 billion and $1.45 billion, which was up $150 million from previous guidance announced one month earlier.

The airline will give 20,000 employees travel credits of $500 each and bonuses of up to $11,500 in cash and shares.

Qantas’ swing back to profit was overwhelmingly driven by its domestic operations, which recorded underlying earnings of $915 million – $785 million from Qantas and $130 million from Jetstar – as the number of flights reached 94 per cent of the group’s pre-pandemic flying capacity, up from 86 per cent in the June half. Joyce confirmed earlier this week the group’s domestic capacity was on track to return to 100 per cent of pre-COVID-19 levels by June.

Meanwhile, international flights almost doubled from 31 per cent to 60 per cent of pre-COVID capacity in the December half, with the airline’s international arm posting underlying earnings of $511 million as it started seven new routes and reopened two. Its frequent flyer program delivered underlying earnings of $220 million and is slated to hit somewhere between $425 million to $450 million in profits for the full year.

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Joyce also credited a controversial $1 billion restructure, launched in the midst of the pandemic, as a driver of its return to profit, which saw the outsourcing of some operational roles and included 1,700 redundancies.

“When we restructured the business at the start of COVID, it was to make sure we could bounce back quickly when travel returned,” he said. “That’s effectively what’s happened, but it’s the strength of the demand that has driven such a strong result.”

NSW Labor Senator Tony Sheldon, a former Transport Workers’ Union boss who has been a fierce critic of Joyce’s decision to outsource over 2000 ground handler jobs during the pandemic, said the airline’s results were nothing to celebrate.

“The ‘Spirit of Australia’ should not be about making a sly buck at everyone else’s expense,” he said in a statement.

“There’s nothing to celebrate in Qantas making massive profits by ripping off customers with extortionate airfares during a cost-of-living crisis.”

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“When the Morrison government gave Qantas a $2 billion bailout during the pandemic, we had an opportunity to change how Qantas treats its customers and staff. Instead, by making that bailout no-strings-attached, Qantas was emboldened to take its profiteering to the extreme.”

Joyce flagged earlier this week the airline’s domestic seat capacity would be back at 100 per cent by June, but said it would take until at least 2024 for its international seat capacity to recover, as carriers all over the world scramble for parts and staff. Increased capacity puts downward pressure on ticket prices, but all airlines are limited by their ability to staff and service flights.

Earlier this week, the airline unveiled a $100 million investment to transform its lounge network over the next three years on Tuesday, including a new first-class lounge at London’s Heathrow Airport and a revamp of the international business-class lounges at Hong Kong, Sydney and Melbourne.

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