Qantas warns over discount air fares unless charges cut

[NickN]

Is Joyce just looking for an excuse to hike up fares to make some cash or is he for real?

Have DJ complained about airport costs?

Would love to hear peoples thoughts on this issue.

By Geoff Easdown

May 28, 2009 12:00am

QANTAS chief Alan Joyce has warned discount air fares will end unless the nation's airports trim costs and stopped charging for everything imaginable.

Mr Joyce said Melbourne, Sydney and Brisbane ranked in the top five airports in the world as measured by operating margins.

The three airports netted margins ranging from 65 per cent to 71 per cent, he said in an address to a Melbourne business lunch.

And he revealed the airline pays $700 million a year to the nation's airport operators.

"Airports are very good at earning revenue and producing profits out of everything you can imagine," he said afterwards.

"I think if they could charge for oxygen at the airport they probably would because they do earn a lot of fees out of everything they can."

Flight fees: Qantas to penalise long-legged passengers

Mr Joyce said Qantas was discounting heavily to stimulate travel, but the low prices that kept customers buzzing through airport terminals were unsustainable in the long term unless the airports trimmed operating margins.

And in a direct criticism of Brisbane airport management, he complained that the airport had recently imposed a 30 per cent increase on Jetstar.

"If we include Auckland, four out of the top five highest margin airports in the world form significant parts of the Qantas Group network," Mr Joyce noted.

He contrasted the Australia-New Zealand situation with Frankfurt-Hahn, Malaysia, Singapore and Hong Kong airports which had reduced charges to help stimulate demand in the present economic climate.

He added that constructive discussions were continuing with the managers of both Gold Coast and Melbourne airports.

"But so far no major airport has agreed to lower its charges in an effort to cooperatively stimulate passenger demand," he said.

"Worse, we are still getting proposals to increase leasing and staff car parking charges significantly".

Mr Joyce had earlier disclosed that Qantas was cashed up with $3 billion in the bank and was better placed than its rival to withstand the economic downturn.

He also told how the airline had funding facilities in place to cover all aircraft purchases until 2010, which he said gave "certainty to our operating going forward"



http://www.news.com.au/dailytelegraph/story/0,22049,25547849-5013605,00.html

[Mike W]

QANTAS chief Alan Joyce has warned discount air fares will end unless the nation's airports trim costs and stopped charging for everything imaginable.

That reminds me of another company... oh yeah, Qantas!

[David Knudsen]

Really Mike? Because last time I flew Qantas, my food and drinks were free, I didn't have to pay any extra for my exit row, and my airfare included my checked luggage?

[Andrew P]

and a free newspaper, an update C9 news, a free IFE, free pillow & blankets, etc etc

[Justin L]

I think it is more accurate to say that Qantas' inflight services such as meals, IFE, pillows, newspaper etc. are included in the ticket price, rather than free.

[Marty H]

Marty H - please do not continually quote the post directly above your reply. It is not necessary - mod.

Which is why QF are saying airports need to reduce what they charge QF as their yeild is down due to having to provide everything in a ticket price they are have to charge to compete against DJ, which make revenue off all the above that QF provide.

[Andre H]

Really Mike? Because last time I flew Qantas, my food and drinks were free, I didn't have to pay any extra for my exit row, and my airfare included my checked luggage?

The first step is the extra fee for the "more legroom" seats, starting in June ( ? ). 80$ short haul, 160$ longhaul = 2500$ per flight for QF. I think, thats a good idea, if I can choose explicit my seat at the booking process.

[Will T]

Is Joyce just looking for an excuse to hike up fares to make some cash or is he for real?

Have DJ complained about airport costs?


Nick, DJ's litigation against the airports (their charges and terminal access in particular) since start-up has been the stuff of legend, culminating in their submissions to the recent Productivity Commission review of airport pricing. They did 'bury the hatchet' with MAP some time ago, but I'd respectfully contend that QF's approach (at least publically) has been 'softly softly' compared to many of their competitors!

[Michael Morrison]

drinks were free,

Not if you want a wine or beer.... flew to CNS and they wanted $$$ for it

[Ricky T]

Not if you want a wine or beer.... flew to CNS and they wanted $$$ for it

Alcoholic drinks are complimentary only on weekday CityFlyer flights after 16:00 (12:00 from PER).

[NickN]

That will be the next thing to go.......

If they have stooped to charging for exit row seats they will cull free booze before long.

[Kelvin R]

NickN: Most PAX only get a single drink with dinner and I imagine this would cost QF perhaps $3 to $4 at the most out of the ticket price. This would be less than the highly publicised cost of Qantas IT measured as a percentage of ticket price. It has been reported that QF IT represents around 10% of a ticket price, so for a red-e fare of $89 one way SYD-MEL, IT costs are probably equal or greater than the meal costs including the free drink.

However, you won't find many $89 seats on the peak hour CityFlyer flights and they are generally on the edge, say after 7:30pm at night. I have noticed the QF flights are now nearly full again during peak and that in the last 2 months effective prices have gone up by around $30 one way for the same flight and that the 767's are back on services that were 737 and the :15 and :45 flight departures are also back. So I think it will be interesting to see the QF load and RPK factors for domestic in Apr, May and Jun.

The two brand strategy has been working very well for QF and has is what is essentially responsible for the new world carrier approach at DJ. DJ got squeezed at both ends by QF and JQ, likewise JQ has done a good job of containing new entrants such as Tiger.

If QF was to cut the CityFlyer full service approach then they would have to slug it out directly against DJ and Tiger but with a higher overall cost base. This wouldn't work and is why they started JQ in the first place. There are still two types of flyers in the domestic market, those who enjoy the full service and are willing to pay a few extra dollars for it (and it is literally a few extra dollars fare bucket compared to fare bucket) and those who are not. It is not a case of PAX changing in large numbers to DJ or Tiger but the traditional QF PAX is not flying at all, in any way shape or form at the moment. Companies are not saying that staff have to fly DJ, they are saying you cannot travel at all. Those who are still travelling are doing so because it is income generating, internal meetings that would have been done face to face are now being done over the web or over the phone.

However everything is runs in cycles and as I mentioned domestically I am already having a seat mate on most flights where as a few months ago I would have had a row of 3 to myself and I have noticed I am also paying more at the same time. So I still think your prediction of the demise of QF is a little early and I would encourage you to research a little further rather than basing your argument around opinion and selecting facts as you end up only looking for information which supports your arguments rather than looking at the whole picture.

[NickN]

Kelvin my point was..... if they are going to charge for an exit row seat to squeeze a few extra dollars per flight, you could imagine how close they are to culling the free booze.

[Mike W]

Is Joyce just looking for an excuse to hike up fares to make some cash or is he for real?

I think you're on to something here Nick.

[Montague S]

Kelvin my point was..... if they are going to charge for an exit row seat to squeeze a few extra dollars per flight, you could imagine how close they are to culling the free booze.

given that Australia is a nation of alcoholics and binge drinkers, I highly doubt your prediction will ever see the light of day.

[NickN]

given that Australia is a nation of alcoholics and binge drinkers

Apart from being a huge generalization......

I think most average Australians would take offence to that comment. :mad:

[lloyd fox]

Question here that if Qantas are going to make a loss in the 2nd half of this financial year, even with the cost cutting as per the below article, how can you say for sure they wont cut out the free drinks and other complimentaries.

Article below states a loss for 2nd part of this financial year.

E blackboard yesterday


Qantas jobs safe as capital is stable
Thursday, 28 May 2009
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Qantas employees can now rest easy with the airline’s chief executive saying yesterday that there was no need to cut capacity or jobs or raise capital anymore.

CEO Alan Joyce told Reuters that the carrier had built up its cash balances and had deferred capital expenditure for its future plans.

“We have used those other mechanisms to make sure that Qantas has sufficient balance-sheet strength to get through our view of the current environment”

Joyce’s remarks have quashed market rumours that Qantas would need to start selling new shares again after it raised A$500 million ($390 million) in February.

Despite the impact of the swine flu on its operations in Japan, which Joyce said its low-cost arm Jetstar has had to cancel a third of flights from, Qantas has been seeing growth in its freight business in China.

The carrier has previously announced job cuts of 1750 and a capacity reduction of 5 percent. Qantas expects a loss for second half of the 2009 financial year.

[Gareth U]

(12:00 from PER).

Beer and wine are complimentary on Perth Cityflyer after 0930 everyday (any flight where lunch is served).

[NickN]

Question here that if Qantas are going to make a loss in the 2nd half of this financial year, even with the cost cutting as per the below article, how can you say for sure they wont cut out the free drinks and other complimentaries.


Thats a very valid point Lloyd, something which has not yet been raised in this discussion.


CEO Alan Joyce told Reuters that the carrier had built up its cash balances and had deferred capital expenditure for its future plans.


Ok so they have deferred capital expenditure..... but what plans have been placed on hold as a result?


Who would you want at the reigns in a time like this ? Joyce or Dixon?

[Jon Harris]

Apart from being a huge generalization......

I think most average Australians would take offence to that comment. :mad:

I think that saying we are all alcos is a bit extreme but Montague does have a point - generally Australia has a strong drinking culture just like UK compared to other countries. Every week there seems to be some sort of violence/disturbance associated with alcohol...

[Mike W]

Apart from being a huge generalization......

I think most average Australians would take offence to that comment. :mad:

I'm offended that I may be categorised as not being an alcoholic and binge drinker ;)

[Craig Murray]

Have DJ complained about airport costs?

Nick I think you'll find DJ have long been advocates for reduced airport charges and have made some pretty big and bold efforts to voice their opinion.

http://cdn-www.airliners.net/aviation-photos/photos/4/0/3/0270304.jpg

It is widely recognised that the airports do charge a premium for near everything if we the public feel free to complain about these things from time to time why can't the airlines? Ultimately, you and I benefit through continued low priced airfares.

[Sarah C]

When is that photo from Craig? The rort is getting worse, DJ should bring that back to an aircraft - good on em!

[Craig Murray]

That pic was taken on August 31st, 2002 which highlights just how long this has been an issue for the airline industry. That particular aircraft flew with those titles from mid till late 2002.

[Sarah C]

Thanks Craig - DJ, bring it back ;)