Qantas forecasts billion dollar half-year profit as travel returns to pre-COVID levels

The airline, which was yesterday taken to the Fair Work Commission (FWC) by cabin crew members that intend to launch industrial action against their employer, says strong travel demand is accelerating its recovery from the pandemic.

Based on forward bookings and current fuel prices, Qantas expects to be profitable for the first time since the start of the pandemic; the five prior consecutive halves saw the company sustain cumulative statutory losses of $7 billion.

Further, net debt is expected to fall between $3.2 billion and $3.4 billion at 31 December 2022, which is below the bottom of the target range of $3.9 billion.

Qantas says this anticipated result has been buoyed by strong domestic travel demand across all categories. Revenue intakes for business travel is over 100 per cent of pre-COVID levels and leisure intakes have strengthened to over 130 per cent.

The company says yields from international markets are ‘particularly strong’ but expected to moderate as Qantas and other carriers steadily increase capacity. International capacity is now expected to increase from 61 per cent of pre-COVID levels in the first half to 77 per cent in the second half as additional planes become available to the airline.

“The broader operating environment remains complex with high fuel prices and high inflation, as well as higher interest rates impacting on consumer confidence,” Qantas says.

“However, robust demand indicates that people are prioritising spending on travel above other categories, which supports the Group’s ability to fully recover higher fuel costs through fares.

“Fuel prices are now around 75 per cent higher than pre-COVID, compared with around 60 per cent in August 2022.”

During the half to date, Qantas has been plagued by repetitional woes as customers complained about flight delays, cancellations and lost luggage. Today, the airline sought to set some of those claims to bed, noting operational performance was improving despite extreme weather events, air traffic control limitations and a busy school holiday period.

Qantas Domestic’s on time performance increased from 67 per cent in August to 69 per cent in September, which the airline claims puts it above its main competitor.

“While this is below the 75 per cent target for some of the reasons mentioned above, performance in October has so far averaged 75 per cent despite a four percentage point impact from continued extreme weather conditions,” says Qantas.

“Qantas’ cancellations fell from 4 per cent in August to 2.4 per cent in September. In October so far, only 1.7 per cent of flights have been cancelled, which is market leading and better than pre-COVID levels.

“Mishandled bags remained low at 6 per 1,000 passengers in September and into October.”

The same could not be said for Qantas’ budget airline Jetstar, which ‘suffered significantly’ in September from six of its 11 wide-body aircraft being out of service simultaneously as a result of lightning strikes, a bird strike, damage from runway debris and challenges with supply chains for replacement parts.

“These aircraft have since returned to service; Jetstar’s domestic and international performance have stabilised significantly in October, with further improvements expected in November,” says Qantas.

CEO Alan Joyce says the period has been challenging for Qantas, but that the latest results demonstrate improvement.

“Since August, we’ve seen a big improvement in our operational performance and an acceleration in our financial performance,” says Joyce.

“It’s clear that maintaining our pre-COVID service levels requires a lot more operational buffer than it used to, especially when you consider the sick leave spikes and supply chain delays that the whole industry is dealing with. That means having more crew and more aircraft on standby and adjusting our flying schedule to help make that possible, until we’re confident that extra support is no longer needed.

“Qantas’ operations are largely back to the standards people expect, and Jetstar’s performance has improved significantly in the past few weeks and will keep getting better with the extra investments we’re making.”

The announcement comes one day after two groups of Qantas domestic cabin crew filed applications with the FWC to vote on industrial action over fatigue concerns and threats to outsource work.

According to the Flight Attendants’ Association of Australia (FAAA), Qantas management has threatened employees that they will not be given work on new aircraft unless they sign onto new enterprise agreements that ‘dramatically cut conditions’.

The FAAA claims the deals being asked of cabin crew would extend duty lengths, while at the same time reducing rest provisions, all while not actually guaranteeing work on the new aircraft.

“Cabin crew have raised concerns that the proposal would significantly impair their fatigue management, with many maintaining childcare responsibilities and unable to afford to live close to airports,” the FAAA says.

“The cuts to conditions are being demanded at the same time as the company is only offering pay rises that immediately fall around 7 per cent short of inflation.

“The two deals have been expired such a length of time that some cabin crew have already fallen below the modern award safety net rates three times.”

FAAA secretary Teri O’Toole says cabin crew are ‘at the end of their tether’.

“Qantas management is asking cabin crew to sacrifice safety to keep their jobs. This is an appalling threat. Thankfully crew take their first responder responsibilities for passenger safety seriously and are calling out the dangers of this proposal for fatigue management and the devastating impact it can have for safety on aircraft,” says O’Toole.

“Cabin crew may serve tea and coffee on a good day, but when it’s not a good day at the office they are the firefighters, the paramedics and the police on that aircraft, and they need to be able to act fast and be free of fatigue.

“Qantas turned a deaf ear to crew’s safety concerns and instead issued an ultimatum. This is not good faith bargaining, it’s bullying.”

If the FWC grants the cabin crews the right to vote on industrial action, the staff may go as far as stopping work entirely, which would wreak havoc on flight schedules.

“Workers are already exhausted trying to keep up with demand on a skeleton workforce following cuts to crew numbers per flight and an overenthusiastic redundancy scheme to cull workers and cut costs despite Qantas being the largest recipient of JobKeeper payments,” says O’Toole.

“To force crew to work even longer and harder than they already are with no additional break between shifts would cause more to go off sick with fatigue, causing further disruption to an already chaotic Qantas flight schedule.

“We implore Qantas to drop its attack on its essential cabin crew workforce and return to the bargaining table in good faith.”

Shares in Qantas have opened up 10.74 per cent in early trade.