The largest airline in Australia, Qantas Airways, announced that it would spend more money than initially anticipated to address “customer pain points,” but also issued a warning that rising fuel prices could compel it to boost prices above their current levels.
Investors questioned the airline’s capacity to increase profits in light of its continually high costs after the report pushed its shares down as much as 2.5% to a one-year low.
The business, led by a new CEO, is attempting to strike a balance between ensuring customers that it is listening to their complaints about widespread service issues and assuring investors that it can control a rise in prices related to a shortage of oil.
A surge in flight cancellations and claims of misplaced luggage were caused by the airline’s handling of the post-COVID travel revival, which accounts for three out of every five domestic airfares sold in Australia.
The antitrust authority sued Qantas Airways in August 2023, accusing it of selling tickets for thousands of already-cancelled flights in 2022, compounding the airline’s problems. When the High Court ruled that Qantas’ 2020 termination of thousands of ground personnel was unlawful, the airline also lost a union complaint.
The alleged “flying kangaroo” announced that it would now spend an additional 80 million Australian Dollars (USD 52 million) on “customer improvements” in addition to the 150 million Australian Dollars previously announced.
The company stated in the trading update that the additional investment “is aimed at addressing a number of customer ‘pain points’ through improvements like better contact centre resourcing and training… more generous recovery support when operational issues arise, a review of longstanding policies for fairness, and improvements to the quality of inflight catering.”
At the same time, it warned that if the 30% increase in fuel prices it has been dealing with since May remained, its anticipated half-year fuel bill would increase by 200 million Australian Dollars (USD 129 million) to 2.8 billion Australian Dollars.
“The group will continue to absorb these higher costs, but in the weeks ahead, it will monitor fuel prices and, if current levels are sustained, will look to adjust its settings,” Qantas Airways stated.
Any modifications would aim to strike a balance between the need for inexpensive travel in a situation when tickets are already high and the recovery of increasing costs.
The firm will probably bear the higher fuel costs “until its target margins come under pressure, at which point it will seek to claw back those costs through capacity reductions and higher fares,” according to RBC Capital Markets analyst Owen Birrell.
After taking over the flagship Australian carrier’s reigns, Qantas Airways boss Vanessa Hudson addressed the venture’s customers on September 2023, as she gave her first interview since being elevated to the position two months early after the shock departure of Alan Joyce.
“We recognise Qantas Airways has not been where it needs to be for a long time,” Vanessa Hudson said, while adding, “I was a part of the leadership at the time, but clearly I wasn’t the chief executive then. I am the chief executive now and what I would say is that I would like to be judged by what we do now and how we behave going forward.”