Much of Qantas’ annual results announcement today was full of the kind of nit-picking over who gets charged what that excites the sharemarket but has nothing to do with the actual services a company sells. However, while confirming that onboard Wi-Fi is still on the backburner and discussing the challenges of making Qantas’ international business profitable, CEO Alan Joyce did offer some interesting insights into how costs mount up on international routes.
Picture by Sean Gallup/Getty Images
During the Q&A session following the announcement, Joyce noted that a typical flight on the Sydney-London ‘kangaroo route’ might attract close to $1 million in revenue. However, fuel costs for the same flight would currently be more than $500,000, Joyce said, making profitability a challenge once staff, catering, airport slots and other expenses factor in.
Qantas has stiff competition on that route, with more than 30 airlines offering Sydney-London connections in some form. Making money on the route is thus challenging even without fuel problems, especially for airlines which can’t charge a premium for first or business class seats.
Another noteworthy figure: there are now 8.6 million members of the Qantas Frequent Flyer scheme, with 2000 new additions each day. That reinforces a point we make constantly: if you do want to book a flight using points, try and do so as early as possible. You’ve got a lot of competition.
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