Qantas has announced plans to invest another A$80 million, in addition to the $150 million previously budgeted, to improve customer service, marking the first impact on profits as the company works to mend its strained relationship with customers.
The additional spending is deemed necessary “at addressing a number of customer pain points” even as the airline faces a $200 million increase in fuel cost in the first half of the 2024 financial year to $2.8 billion after hedging.
“This additional investment is aimed at addressing a number of customer pain points through improvements such as better contact centre resourcing and training, an increase in the number of seats that can be redeemed with Frequent Flyer points, more generous recovery support when operational issues arise, a review of longstanding policies for fairness and improvements to the quality of inflight catering,” Qantas said in a statement to the Australian Securities Exchange (ASX).
The airline told investors it was already working to accelerate some initiatives such as the re-platforming of the Qantas app.
Robust travel demand
Meanwhile, demand for travel remains robust, with school holiday and football finals-related travel rising 8% compared to the September/October period last year.
The airline expects to transport more than four million passengers on 35,000 international and domestic flights this year, up from 3.7 million on 28,000 flights in 2022.
Fare hike, maybe
Despite the optimism, Qantas cautioned that escalating fuel and foreign exchange costs could result in fare hikes.
Fuel prices have increased by about 30% since May, driven by a combination of higher oil prices, higher refiner margins and a lower Australian dollar, it noted.
Consequently, the airline expects a further $50 million hit to its bottom line from non-fuel related foreign exchange changes in the first half.
“The group will continue to absorb these higher costs, but will monitor fuel prices in the weeks ahead and, if current levels are sustained, will look to adjust its settings.
“Any changes would look to balance the recovery of higher costs with the importance of affordable travel in an environment where fares are already elevated.”
Capacity and network
Qantas and its subsidiary Jetstar expect to increase international capacity by 12% by the end of the year, thanks to new aircraft deliveries and wet-leasing agreements.
This equates to nearly 50 additional flights per week and includes the resumption of Qantas' Sydney-Shanghai route and the introduction of two new routes, Brisbane-Wellington and Brisbane-Honiara.
Jetstar will also launch a new service from Brisbane to Tokyo.
The capacity projections for the first half of 2024 remain largely in line with estimates provided late last month.
Still financially strong
Qantas affirmed that it remains in a strong financial position, with debt levels and revenue streams continuing to be robust.
Its $500 million share buyback program announced in August is 10% complete and the airline intends to seek shareholder approval for additional buybacks, if and when necessary.