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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. Utilising a large fleet of narrow and wide-body Airbus and Boeing aircraft, Qantas operates an extensive domestic and international network, with services to New Zealand, the Americas, Asia, South Africa and Europe. Regional services are provided by subsidiary, QantasLink. Qantas is a founding member of the oneworld alliance.
Location of Qantas Airways main hub (Sydney Kingsford Smith Airport)
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4,427 total articles
ATSB releases final report of loss of separation between QantasLink 717 and vehicle at Perth Airport
387 total articles
There's no room to stand still in the airline business. Qantas CEO Alan Joyce's often controversial measures during a turbulent four years are being vindicated. His aggressive transformation of Qantas appears now to be showing remarkable dividends, with the prospect of going from a billion dollar loss in 2014 to a billion dollar profit just a year on. Next on the agenda will be growth.
Qantas International has returned to profitability for the first time since the global financial crisis (GFC); this is partially due to depreciation gains following large write-downs in FY2014, but there is a fundamental redirection too. Qantas Domestic has bounced back now that the domestic capacity war is over and with room for further improvement. Jetstar has returned to profit but is still under-performing compared to previous years, again with more upside.
Lower fuel costs will deliver Qantas a minimum AUD500 million benefit, setting the group up for a full-year profit around AUD1 billion. The fuel tailwind is an added bonus. Even without it, there are structural changes that will continue to flow through irrespective of that windfall. "Today we can see a bright future," Mr Joyce says.
Yet that proclamation means Qantas must address calls for it to return to growth now that its dark days of restructuring are, if not all behind it, at least nearing fruition. Initially growth is expected to be mostly in the international market as the relatively mature domestic market may be challenged by weak consumer sentiment. For the longer term international growth must be the goal; this will hinge on the synergies Qantas can gain with its key international partners, and if Qantas is successful in lobbying for a slowdown in foreign carrier growth.
Air New Zealand remains one of the world's few investment-rated airlines (Baa3), and the only rated airline outside North America and Europe. Its latest results reinforced that position. Air NZ is building on that strength with a 20% increase in pre-tax profits in the first half of its fiscal year, the six months to 30-Dec-2014. That result was driven by increased revenue performance, notably a 1.9% yield gain and 1.2% increase in traffic.
Air NZ realised only a modest NZD20 million (USD15 million) gain from fuel as lower prices were offset by hedging losses. Air NZ expects a stronger gain of approximately NZD82 million (USD61 million) in the second half, but this too will be well short of what Air NZ could have realised without hedging losses.
Some of the fuel price gain will be used to stimulate demand as Air NZ grows at a much faster 12% rate in the second half. This includes its new Auckland-Singapore route, domestic growth twice the rate of New Zealand's GDP. Later in 2015 comes the start of a Buenos Aires service – and possibly a fourth - as yet undisclosed - North American destination.
A significant expansion in air traffic rights for Chinese airlines to Australia saw their stock prices jump 3-5%. Ironically, the growth made available from this agreement may mostly be unprofitable, at least in the short term. This explains why China is pursuing gradual liberalisation and not the open skies Australia wants. There is no doubt which group of airlines gain the most: it is the Chinese carriers, who already account for 92% of Australia-China non-stop seat capacity. Qantas, the only Australian airline to operate non-stop, is at 8%.
But Australia is still very much the winner in the bigger picture. Chinese visitor numbers to Australia in the first nine months of 2014 were up 13.4%, and overall volumes more than doubled between 2009 and 2013. As with other destinations in the region, Chinese are quickly becoming a key source market. For Sydney Airport, Chinese passengers account for half of its international growth while at Melbourne Airport China is its largest long-haul market. The expanded agreement is already bearing fruit with capacity additions from Air China and China Eastern as well as a new service from Xiamen Airlines to Sydney expected to be launched before the end of 2015.
Los Angeles International Airport has emerged as a battle ground for American Airlines and Delta Air Lines during the last couple of years as the market, while hugely fragmented, retains a high level of importance within the networks of most US major airlines.
But the success of each airline’s recent expansion in Los Angeles is tough to predict. Both American and Delta unsurprisingly declare that their operations in Los Angeles are successful; but the longevity of that success is difficult to predict given the tough competitive dynamics in the market.
The investments each airline is making in Los Angeles obviously carry some risk. But the scenario for American is a bit different given it does not have a true west coast hub for long-haul traffic, and the operating constraints in Los Angeles threaten to constrain its optimal growth path.
Air New Zealand is boldly moving forward with its longstanding aspiration to serve Latin America by announcing plans to launch service to Buenos Aires in 2015. The new Auckland-Buenos Aires route is made possible by a new partnership with Aerolineas Argentinas, which will provide connections within South America and local sales support.
For Air NZ, Buenos Aires fills the last major white spot in its network following the upcoming resumption of services to Singapore. Argentina has proven to be a challenging market for foreign carriers but for Air NZ it represents the best South American option with a risk level that is acceptable with the right partnerships.
For Aerolineas, codesharing with Air NZ provides an opportunity to add New Zealand and Australia back to its network. Aerolineas pulled out of the Southwest Pacific market in Apr-2014, leaving a void which Air NZ is eager to fill as it has the aircraft type and connections to succeed where Aerolineas failed.
Virgin Australia CEO John Borghetti has transformed the landscape of Australian aviation, but his practices of virtual long-haul flying and strategic partnerships across multiple alliances offer examples for airlines globally to reflect on. Mr Borghetti, in a video interview for CAPA TV, discusses the pivotal changes Virgin has so far made as well as what is next.
Mr Borghetti affirms the distance he wants between Virgin and its LCC unit Tigerair Australia, unlike the closer Qantas-Jetstar relationship. Airlines should be like toothpaste, Mr Borghetti uses as an example: consumers should have a choice of distinct and separate brands without realising they are owned by the same few companies.
While Qantas expands its role in Asia, including a proposed JV with China Eastern, Mr Borghetti expresses no interest in an Asian strategy, preferring instead to remain focused on Virgin Australia's core domestic network and to work with Singapore Airlines and not another airline. “We can feed the China traffic over Singapore with Singapore Airlines and that's as good as it gets,” Mr Borghetti says. “There is no better partner than Singapore Airlines.”