Qantas faces headwinds

Retiring chairman points to four key challenges

QANTAS has reiterated its expectation that increased revenue should largely offset fuel price rises, but chairman Leigh Clifford says the airline is looking at challenges beyond the current financial year.

The speech of chief executive Alan Joyce yesterday at the annual general meeting echoed a trading update released a day earlier in which Qantas said an 8 per cent increase in the value of forward bookings would eat into a large increase in fuel costs.

“This gives us the confidence that we will substantially recover higher fuel costs in FY19 – which for the group as a whole are now likely to be around $860 million higher than last year,” Mr Joyce’s speech said.

But Mr Clifford, who will retire after the meeting in Brisbane and be replaced by former Wesfarmers managing director Richard Goyder, said the airline was looking at longterm challenges.

“Competition is intense. Fuel costs are rising. And there is some global uncertainty around trade flows,” Mr Clifford said.

“But a lot of the restructuring we have done in recent years has been to make sure we can keep delivering for customers, employees and shareholders in spite of headwinds.”

Mr Clifford (pictured) called out what he called four “mega trends” that Qantas must deal with.

“How will global shifts change where people want to fly? How do we use big data to improve our business and deal with cyber threats?” Mr Clifford said. “As a big user of fossil fuels, how do we manage the challenges of climate change? And how do we evolve to meet the changing expectations of our customers and employees?”

The airline on Thursday revealed in a trading update that a jump in forward bookings and higher airfares had helped offset rising fuel costs for a 6.3 per cent rise in first-quarter revenue to $4.41 billion.

It said the value of forward bookings was up 8 per cent on flat capacity compared with the same time last year, and 6.2 per cent up on the June quarter, with travel demand strong across the business and leisure markets.

Passengers paid 5.4 per cent more on average for seats over the quarter, with the strong revenue performance also offsetting higher commissions paid to travel agents, and the impact of a weaker Australian dollar.

Revenue across Qantas and Jetstar’s domestic operations was up 6.8 per cent while international group revenue rose by 4 per cent.