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- Qantas Centre
203 Coward Street
Mascot NSW 2020
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- Sydney Kingsford Smith Airport
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Qantas Airways is operated as part of the publicly listed Qantas Group. It is the national airline of Australia with major hubs in Sydney and Melbourne and secondary hubs in Perth and Brisbane. Using a large fleet of narrow and wide-body Airbus, Boeing and Bombardier aircraft, Qantas operates an extensive domestic and regional network within Australia as well as international services to New Zealand, North America, Asia, South Africa and Europe. Qantas is a founding member of the oneworld alliance.
Location of Qantas Airways main hub (Sydney Kingsford Smith Airport)
Qantas share price
4,018 total articles
376 total articles
By his own admission, Qantas CEO Alan Joyce is well past thinking he has won the popularity contest. His calling however is not how people see him but rather securing a future for Australia's over-loved, and previously much-neglected, airline. Mr Joyce inherited an airline that was privatised from government ownership but never shaken of its legacy habits. It was easy for predecessors to avoid taking surgical action: Qantas had the full service domestic market to itself, and now-household names like Emirates and AirAsia X were not yet in the fray. Domestic profits subsidised steadily eroding internationals services. Then the world changed; international performance has deteriorated and the domestic cash cow is under attack from a resurgent Virgin Australia.
There were factors outside of Qantas' control that led to its FY2014 underlying loss of AUD646 million, but that also included Qantas adopting a flawed strategy in its domestic capacity war. A more rational Qantas is calming down and the gains have been immediate. Qantas expects a 1H2015 profit, implying that the disastrous 2014 was not the terminal decline that some have trumpeted. And nor does Qantas need to sell its prized loyalty division. The pre-tax loss was dragged down by the shock headline figure - with just a touch of spin - of a post-tax loss of AUD2.8 billion. With that number behind them, Qantas can only look good now. That non-cash technical adjustment was driven by a one-off AUD2.6 billion write-down of its international fleet, confirming long-held views the fleet was over-valued but never previously addressed.
Driving the write-down is a change in corporate structure that Qantas expects will make it easier for its international division to receive foreign investment. On this investment prospect there is no timeframe or clear suitor; CEO Alan Joyce talks of a "long term option". Perhaps this move is driven less by interest than by a need to be seen as having secured options out of the public, and ultimately unsatisfactory, ownership debates in Canberra.
Air New Zealand reported its third consecutive year of profit growth in the FY to 30-Jun-2014. The contrast is obvious with Qantas, which has announced a massive headline loss of AUD2.8 billion (although an underlying loss which improved considerably on analysts' expectations). But the reality is the three hours that separates Sydney from Auckland also significantly changes market conditions that account for the difference in fortune. Air New Zealand faces no major competitor in its core domestic market while in the long-haul market competition is significantly lower and strong partnerships dominate.
Air New Zealand is not resting on its laurels, with a projected 6% ASK growth in FY2015. Domestic, trans-Tasman and North America growth will be below average, Europe flat, and Asia above average as Air New Zealand resumes Auckland-Singapore flying as part of its approved JV with Singapore Airlines. Aside from the Singapore route, most growth will occur through capacity up-gauging as larger aircraft replace smaller ones, reducing growth risk and hefty route start-up costs.
As Qantas and Virgin Australia, at least temporarily, call a truce on their domestic market share battles, their focus of attention turns to international operations as they report their fiscal 2014 results on 28 and 29-Aug-2014. Neither has achieved its ideal position and there is undoubtedly a lot of head scratching going on among their strategy teams. Qantas in particular is expressly looking at cutting as much as USD1 billion in costs out of its international operations; and neither airline has yet been able to establish a sound foundation for a North Asian strategy.
In this short pre-results overview, we look at some indicative, publicly available, load factor statistics that may suggest where each should be heading in terms of laying down the basis for sustainable international strategies. There is a lot more to route planning than historic load factors, but it is a good place to start. No doubt more thinking will be exposed when the airlines report FY2014 financials.
Qantas is expected to post a loss of between AUD700 million and AUD1 billion for the full 2013/14 financial year to 30-Jun-2014 and now faces the unsettling reality that the Qantas Sale Act (QSA) isn’t going anywhere.
Australia’s Federal Government retreated on the planned Qantas Sale Amendment Bill 2014 that would have repealed part three of the QSA, recognising it wouldn’t pass the Senate, and agreed to side with the Australian Labor Party (ALP) to remove foreign ownership limits. The largely pointless compromise revision was adopted on 18-Jul-2014.
The previous provisions prevented any single airline investor holding more than 25% of Qantas and of total foreign airline investment of 35%, capping the total foreign investment at 49%. The new provision simply caps foreign ownership at 49%, with no airline restrictions.
Qantas will refocus its service between Australia and New Zealand to allow greater flexibility to adjust capacity during shoulder and low seasons. While relatively straightforward, Qantas has not previously done this. Qantas in 2013 adjusted monthly seat capacity by -9% to +7% while Air New Zealand adjusted capacity by -19% to +16%, Jetstar by -22% to +22% and Virgin Australia by -15% to +10%.
Air New Zealand has been rewarded with consistently high load factors while Jetstar and especially Qantas have performed weakly in off-periods. There is now an opportunity for closer integration between Jetstar and Qantas. Virgin Australia has had the weakest load factors, perhaps suggesting its move to a premium positioning is not commensurate with its core trans-Tasman leisure traffic. It too may need to revisit its approach.
When Qantas Group informed the market that it would not add domestic capacity in the first quarter of FY2015 commencing 01-Jul-2014, the perceived implication was that the capacity and fare war Qantas had fought with Virgin Australia was over. Virgin's "Game Change Programme" re-positioned the carrier as a full-service airline with business class offering, bringing premium competition to the Australian market for the first time since Ansett's 2001 collapse. Virgin was bullish on growth opportunities while Qantas abided by its strategy calling for 65% marketshare. In borad terms, when Virgin added a flight, Qantas added two.
But the white flag has not been raised. Qantas Group's 1QFY2015 domestic capacity will be flat, but this is comprised of capacity decreases in the Western Australia market (a 10% reduction in intra-WA) and capacity increases in the east coast, mainly around Queensland. The WA market already was so over-capacity that there were never going to be winners. Pulling back capacity is not so much a strategic decision as delayed common sense. More reductions may still be needed. The Qantas-Virgin fight appears set to continue in the country's east.