How Fuel Makes International Flying Unprofitable

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.


    It looks like someone slugged Joyce across his face.

      He's been dead for going on 3 years now. They just prop him up and hope noone notices.

        Hahaha very close to a coffee spit, thanks :)

      They need to convert planes into First Class only Aircraft and charge ten thousand dollars for an international flight. poor people can go back to ships.

    Qantas' problems have been poorly managed fleet choices and dreadful management staff relations. Where in the full year results did Joyce talk about benefits to passengers? He doesn't because there aren't any. You still get to travel on the same geriatric and fuel inefficient aircraft, with staff that hate their bosses.

    If it wasn't for their Frequent Flyer plan they would be basically dead. Not that you can ever redeem the flights you want without paying hundreds of dollars of "charges and taxes" which bear no relation to the actual charges and taxes on an actual flight.

    How Joyce can still be in charge is beyond me.

    Obviously they need to stop using fuel!

    How about this: as an airline manager you foresee that fuel prices will continue to rise and rise, so in the years before it becomes a real problem you set up the most fuel efficient fleet possible, you do everything you can about customer service and quality so that increased prices are offset by loyalty, and you research alternate biofuels like Virgin has started doing.
    Then you deservedly collect your many millions of dollars annual salary.

      And then Boeing delivers the fuel efficient 787 late, oh and the A380 was also late.
      You can't exactly buy an airplane off the shelf, there is a waiting list.
      Qantas need to scrap the 767s as soon as possible which isn't going to happen without 787 deliveries.

    If it wasn't for the expensive fuel, the expensive aircraft maintenance, the expensive staff, the restrictive regulations, the GFC mark II, the................
    Man, that guy can whine!

    No doubt he will still keep his $6m salary plus a bonus for "performance"

    He doesn't care because he has topical "CEO" syndrome. Those guys tend to sign on with a company for 3-5 years then leave with a golden handshake.

    Anybody else want to pop that big pimple on his shoulders..?

    I saw that interview and I have a question for anyone else who saw it - Did anyone see him at any time admit that he wears some of the responsibility??
    It is interesting that with a "strong" Australian dollar he is whinging about fuel costs...QANTAS pays for fuel in American dollars - A high Australian dollar means LESS EXPENSIVE fuel...that's economics 101...
    Furthermore the 787 fleet that he has decided not to buy is a more efficient aircraft which means less fuel usage - another savings...
    Did these facts slip by the institutional voters who opted to keep him in power after he grounded the fleet - an act that isn't just done on a whim...

      Nevermind that fuel prices are also determined by oil prices, which have risen, oh, I dont know, more than doubled since 2004. Given that oil is the biggest cost factor each flight, that's a huge amount to try to absorb.

      I think he's a bit of a douche, but he was put there for a reason, so presumably he has some smarts. It's ridiculous how people in this country start throwing shit at CEOs as soon as they start trying to explain what's causing business pressure. Should he get a bonus? No. Should he be getting paid as much as he is (or any other CEO, for that matter)? Hell no. is it simply HIS FAULT that the airline is starting to struggle. Also no.

      Would you be laying out billions of dollars, running a company in this position?

      Also, grounding the fleet was the right option, in my opinion. Unions are full of shit, don't they realise that making stupid wage demands, coupled with strikes that can cripple a business, is just going to drive the business away from that workforce to something more dependable? The only thing worse than CEO salaries is unions.

    The biggest 'real' cost that Qantas has is 'Alan Joyce'. As long as he keeps delaying the aircraft upgrades the further Qantas will fall behind and will just disappear like many of the other iconic brands. How he manages to convince the Qantas board that he is worth his package defies logic, but maybe the whole board needs a refresh. Just goes to prove how well privatisation of government assets works for the citizens.

    Qantas are acting like a bunch or entitled noobs! They're like the high school wizz kid that goes to university only to find they're surrounded by wizz kids. Most of them smarter than them. They're acting like this "international airline thing" is some fancy new form of transport. How come they have so much trouble doing what most other carriers seem to do effortlessly?

    All airlines are on a level playing field, if not, Qantas has (or at least had) an advantage. Why are Qantas planes always in the media about falling out of the sky, or being grounded (excluding Tiger).

    Why is Virgin Australia or the other airlines flying into Australia doing well and Qantas not?

    I won't fly Qantas, and there are many more people who won't fly either? Why? Unreliable, unsafe? He has to change the customers opinion for not choosing Qantas over the competitors. But industrial actions, cut of maintenance, is just reinforcing to consumers not to fly Qantas.

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