“Qantas Airways is poised to report a record profit this year as it reaps the benefits of the lower fuel price and an end to the domestic capacity wars,” says UNSW Business School’s John Roberts, who has been analysing the business model of the airline. “Qantas will open its books on the past half year on Thursday. The results could approach the record numbers we saw in 2008.”
The Flying Kangaroo is forecast to report a full year pre-tax profit of over $1 billion, as the airline approaches the end three-year ‘transformation program’ which is expected to save two billion dollars in costs by mid-2017.
John Roberts, a Professor of Marketing at UNSW’s Business School says “it really is a stark contrast to last year, when it made a pre-tax loss of three quarters of a billion dollars. It is now flying high, but just last year it was firmly on the descent, with large losses due to its ageing fleet, huge fuel bill, a nasty little capacity war with Virgin and lack of customers. It has quite the opposite problem now.”
“What is quite remarkable is also the way Qantas has focused on passenger experience as a way of boosting numbers. In just a few months Qantas has reversed its policy of serving smaller inflight meals and has increased their size.
The Qantas clubs have had a revamp in Los Angeles, Hong Kong and Singapore. It is even enforcing a lounge dress code, which gives the airline an ‘upmarket’ style, and means customers feels it is worth paying the extra ‘Qantas Premium’,” he says.
On Thursday Qantas may also announce it will also buy new Boeing 787-9 aircraft. “That would allow the airline to replace ageing 747s and Airbus A330s and to launch new routes,” he says.
Qantas results are in contrast to Virgin Australia which reported a slim $10.2 million pre-tax profit last week. He says “Virgin is aiming for the same markets as Qantas: they will shortly start selling Business Class over the Tasman, and opening lounges at Alice Springs and Darwin for example. However they have a much smaller fleet, and are still playing ‘catch up’ to the big boy in the market: Qantas.”
He adds it is not going to be all clear skies for Qantas as it flies into the future. In the long term it has marketing challenges including brand tension between its Jetstar and its Qantas badges.
“Lines between the two have become increasingly blurred meaning that Jetstar is not as effective as acting as a price fighter to protect the domestic market share and Qantas is not as effective as capturing the margins in the business market as it was when the distinction was clearer,” he says. “However, there is no doubt Qantas has some breathing space due largely to an improved environment. The question remains as to whether it can undertake sufficient business re-engineering to be able to comfortably weather further turbulence that will undoubtedly hit the domestic and international aviation markets in the next few years.”
For further comment call
John Roberts on 02 9385 9698, 0421 078355
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