Qantas Group to increase capacity by 11% in 2011 as outlook 'continues to improve'


By contrast with recent slightly downbeat projections from Singapore Airlines and Cathay Pacific, Qantas CEO Alan Joyce today gave a positive view of upcoming operating conditions, indicating that the group's capacity was to increase by 11% during the first six months of 2011, "while maintaining flexibility".

  • Qantas Group's capacity is set to increase by 11% in the first half of 2011, with a focus on regional and low-cost operations.
  • Jetstar, the low-cost subsidiary of Qantas, experienced significant growth with a 20% increase in domestic capacity and 12% increase in international capacity.
  • Qantas International's capacity grew by 1% in the first half of FY2011, reflecting a reduction in average stage length.
  • Qantas Frequent Flyer Programme reported record earnings, with a 20% improvement over the previous year and a membership increase of 12%.
  • Qantas Freight experienced a strong recovery in the international air freight market, particularly on China to US routes.
  • The overall operating environment for Qantas is improving, with higher forward bookings and expected higher yields in the second half of FY2011, although fuel costs will be significantly higher.

Jetstar the star

The majority of this growth will be attributed to regional operations (capacity growing at 9% CAGR) and low-cost operations, although Qantas mainline will increase domestic capacity by 4.3% and international capacity by 4.3% in the second half of FY2011.

Qantas Group capacity was up by 3% in 1HFY2011: Qantas International increased 1%; Qantas domestic capacity up 6.9% and QantasLink capacity up 10.6%. Jetstar's domestic capacity increased by 20%, with 12% international growth. Jetstar Asia reported capacity growth of 46%.

Mr Joyce noted that with the domestic market continuing its strong post-financial crisis recovery and growth, the Qantas Group will need additional capacity to maintain 65% domestic market share. He noted the carrier will add the 11% "while maintaining flexibility" - a clear threat to any competitors planning to add seats in its markets. According to CAPA estimates, Qantas carried about 10-12% reserve capacity last year, as it under-utilised its existing fleet compared with previous years.

For the period, Jetstar delivered another record profit, with underlying EBIT of AUD143 million, up 18%. But Qantas' own performance was much more muted.

A380 disruptions did not help, but the Group's international operations grew only 1% (ASKs), a level not matched by RPKs, up only 0.3, although passenger numbers grew 1.5%, reflecting a reduction in average stage length.

Frequent Flyer Programme continues bull run

Qantas Frequent Flyer Programme reported an underlying EBIT of AUD189 million, a record result, and a 20% improvement over the comparable half-year.

Membership of the FFP is now at 7.5 million, up 12% over the past 12 months, following the addition of new partners, including Caltex, as part of the highly successful Woolworths Group alliance, and OnePath life insurance. The entity also launched multiple market leading credit card products, adding further to the group's highly successful exploitation of its brand.

Qantas Freight, with an underlying EBIT of AUD41 million, up 141 per cent), "confirmed the strong recovery of the international air freight market", notably the China to US routes.

Outlook improving

According to Mr Joyce, "the general operating environment continues to improve".

Forward bookings point to higher yields in the second half of FY2011 than in the same period last year, although fuel costs will be significantly higher and part of the enhanced yields will derive from the recently re-imposed fuel surcharges.

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