Qantas has signaled that it may raise already high ticket prices in reaction to growing costs of aircraft fuel. This pricing choice would pile additional pressure on an airline that is working to recover its damaged brand.
The warning about pricing is being issued at the same time as the national carrier is facing backlash from customers who are upset about withheld travel credits, poor service, and allegations that it sold tickets for thousands of flights that had already been cancelled. Additionally, it engaged in the unethical outsourcing of 1,700 ground handling positions.
Qantas committed to investing $80 million in customer upgrades during a market update it provided on Monday. However, it also stated that it may perhaps change plane costs if the current levels of gasoline prices were maintained in the weeks ahead.
“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,” the airline stated. “Any changes would look to balance the importance of affordable travel in an environment where fares are already elevated.”
It has been debated for a long time whether or not there is a correlation between the cost of aviation fuel and ticket pricing. Historically, airlines have been quick to raise fares in response to hike in oil prices, and they have been slower to do so when prices have decreased.
Recently, Qantas reported an annual profit that broke previous records and was far higher than profits recorded before the pandemic. The return-on-invested-capital statistic, which is one of its primary financial KPIs, reached 103.6%, compared with approximately 20% in the years preceding up to 2020.
Michael Kaine, national secretary of Transport Workers’ Union (TWU), stated that service standards had significantly decreased while ticket costs had significantly increased.
“A staggering $2.5 billion record pre-tax profit shows it is not disappointed customers who should be copping higher fares but the airline that wants us to believe it is ready to change its ways,” Kaine said. “An eye-watering $2.5 billion record pre-tax profit shows it is not the airline that should be copping higher fares.”
Since May 2023, the airline said on Monday that the cost of gasoline has jumped by around 30%. This was attributed to a number of factors, including rising oil prices, higher refiner margins, and a weaker Australian currency. According to the market report, if current trends continue, Qantas’ fuel bill will rise by nearly $200 million to reach $2.8 billion in the six months leading up to December.
“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,” Qantas stated. “The group will continue to absorb these higher costs.”
According to the worldwide jet fuel price monitor, despite recent increases, prices for jet fuel are currently at a level that is lower than they were at the beginning of 2023. The index for jet fuel is also still more than 20% lower than it was during its peak in the middle of 2022.
Hedging tactics are used by Qantas and its competitors, as well, in order to smooth out volatile pricing swings.
A drive to gain back customer support that included an apology from the new chief executive of the airline, Vanessa Hudson, who promised to return the company to its previous esteem after a “humbling period,” is in danger of failing due to the airline’s warning about the prices of its tickets.
Even though the now-former chief executive Alan Joyce brought ahead his own retirement, pressure is still rising on the chairman of Qantas, Richard Goyder, to step down as well.
“We need a total reset and a fresh start – including with a new board,” the TWU said on Monday. “We need a total reset and a fresh start.”
Goyder, who is also the chair of Woodside and the AFL, has promised to continue serving in his current role in order to assist Qantas in rehabilitating its image.
At the annual general meeting of the company, which will take place at the beginning of November, the shareholders will have the opportunity to voice their dissatisfaction. However, there will not be a vote to re-elect the chair of the committee.
The airline announced on Monday that it would make considerable investments in customer service enhancements during the current fiscal year, with funding coming from the company’s revenues.
The funds will be used to alleviate a variety of “pain points” for customers, such as expanding the number of seats that can be redeemed using frequent flyer points.