Qantas profit falls on spending to fix image, easing fares

Qantas Airways Ltd. said first-half profit declined as airfares fell from their post-Covid spike, and new Chief Executive Officer Vanessa Hudson increases spending to help restore the airline’s tarnished reputation. 

Underlying earnings before tax in the six months ended Dec. 31 dropped to A$1.25 billion ($757 million) from A$1.43 billion a year earlier, the Australian airline said Thursday. That was broadly in line with analyst estimates of A$1.16 billion.  Lower fares — which have fallen about 10% in real terms since peaking in December 2022 — had around a A$600 million impact on profit, the carrier said. 

Hudson, who took the helm in September, is attempting to repair the damage to the Qantas brand incurred under former CEO Alan Joyce. The carrier’s reputation was shredded by a series of scandals and missteps — including claims it sold tickets for thousands of flights it had already canceled, a ruling it illegally sacked 1,700 workers during the pandemic, and a slew of delays and cancelations as travel demand surged in the aftermath of the pandemic.  

“We know that millions of Australians rely on us and we’ve heard their feedback loud and clear,” Hudson said in the statement. “There’s a lot of work happening to lift our service levels and the early signs are really positive.” 

Amongst new initiatives announced Thursday, Hudson said Qantas will accelerate the rollout of free wifi on international flights, upgrade digital platforms to allow passengers to track their luggage during the journey, and work with banks to proactively refund remaining Covid flight credits, which now stand at A$468 million. It will also give a A$500 travel credit to its around 24,000 workers. 

Hudson faces the delicate task of balancing the needs of customers with those of shareholders, who became accustomed to record profits and generous capital returns when Joyce was in charge. The carrier Thursday announced an additional A$400 million share buyback. 

Qantas shares rose as much as 1.8% in early Sydney trading, before paring gains to be up 0.5%. The stock has gained about 5% this year. 

Plane Orders 

Hudosn also has to start paying for the huge plane orders to renew the ageing Qantas fleet that also date back to her predecessor. The carrier today confirmed eight additional Airbus A321XLRs for its domestic fleet from its existing order. That takes the total number on order to 28, with the first to arrive early next year. 

“Travel demand remains strong across all sectors, with leisure continuing to lead and business travel now approaching pre-Covid levels,” she said. 

Singapore Airlines Ltd. this week warned competitive pressures and rising costs could hurt its outlook. The airline highlighted the challenges posed by high fuel prices, inflation and supply-chain constraints. Air New Zealand Ltd. on Thursday said it may increase ticket prices to cover rising costs after reporting a 38% slump in interim earnings and forecasting an even worse second half.

At Qantas, Hudson’s ability to recoup any higher costs by raising ticket prices is limited by her clear ambition to look after customers better.

Qantas’s board, meanwhile, is also getting a makeover. The airline on Wednesday named boardroom veteran John Mullen as its new chairman from July to lead the overhaul of the airline. Outgoing Chairman Richard Goyder flagged his own departure from the airline in November as part of the management cleanout.