Qantas could increase ticket prices and plans to expand add-on fees at its low-budget carrier Jetstar, after the company said fuel costs contributed to its lowest pre-tax profits in four years.
After delivering the airline’s annual results on Thursday, the Qantas chief executive, Vanessa Hudson, said the company could push for more revenue because passenger demand remained strong despite cost-of-living pressures.
“We are not saying that everything that can be done has been done, because we’re going to continue to drive where we see demand,” Hudson told analysts, who asked if further fare increases were planned.
“We’re going to continue to push to maximise revenue and clearly, obviously, maximise earnings.”
Qantas recorded a sharp decline in its pre-tax underlying profit – at $۲.۰۶bn in the year to ۳۰ June – with higher fuel prices linked to the Iran conflict denting the airline’s profitability.
Those higher fuel costs were disproportionately felt by its older A۳۸۰ fleet.
Qantas said it would start retiring the models – primarily used for long-haul international flights – in ۲۰۲۸, rather than ۲۰۳۲ as planned, as it expected maintenance costs and disruptions to rise.
The company said it expects to buy up to ۲۰ additional planes from ۲۰۳۰ as it continues its fleet renewal program.
Hudson said Airbus A۳۵۰-۱۰۰۰s and Boeing ۷۸۷ Dreamliners were being considered. But there were no plans to order more of the ultra-long haul A۳۵۰s like the ones to be used for Qantas’ planned Project Sunrise Sydney-London route.
Looming Jetstar fees
While airlines tend to hedge against rising fuel costs – a financial strategy to protect against volatile prices – it only offers partial protection. They also typically increase air fares and reduce seat capacity on less popular routes to maximise profits.
Qantas’s annual accounts show that while its international routes are less profitable than they used to be, its Jetstar business remains a strong revenue earner and is at the forefront of an attempt to make the airline more profitable.
Last month, Jetstar announced it would charge fees to put carry-on luggage in overhead lockers, in a controversial move that was widely criticised by consumer advocates.
Stephanie Tully, Jetstar’s chief executive, told investors on Thursday the budget carrier planned to split more services from the individual ticket price in a bid to keep the advertised fare lower.
“Obviously, we’ve launched a product in the last few weeks that’s got a bit of attention around baggage, but we’ve got many more to come,” Tully said. “So we’ve got a whole pipeline of ancillary [non-seat] initiatives.”
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Non-seat fees, including check-in baggage, preferred seats, cancellation rights and meals and snacks, generate more than $۱bn of Jetstar’s $۶bn annual revenue. Tully said on Thursday that figure would rise significantly.
The median Jetstar fare was close to $۱۵۰ in the year to June, up from nearly $۱۰۰ in ۲۰۲۲, company reports indicate.
Meanwhile, Qantas increased its overall revenue by ۷% to $۲۵.۵bn over the ۱۲ months. But it took on an extra $۶۱۰m in fuel costs across its network, making the company less profitable.
Days before the US and Israel struck Iran in late February, Qantas delivered a record $۱.۴۶bn pre-tax profit for the six months to December, as passengers shrugged off cost-of-living pressures to travel within and outside Australia.
Its rising fuel costs have been partially offset by ticket sales to new customers who switched to Qantas after cancelling flights at airlines with Middle East stopovers.
Qantas said its loyalty scheme had increased underlying earnings by ۱۲% in the year, to $۶۲۵m, with a ۶% growth in active members. Uber was the fastest-growing source of points.
Banks have reformed their credit cards rewards schemes ahead of the ban on card surcharges, which is expected to affect Qantas’s frequent flyer points scheme. The company said it still believed the points business would earn at least ۵% more in the coming financial year and meet company targets of $۸۰۰m in earnings by ۲۰۳۰.
Qantas’s share price rose more than ۴% in early afternoon trading on Thursday.
