Qantas admits yield woes as capacity grows

Qantas admits yield woes as capacity grows
By admin

Qantas has admitted that short term yields will suffer as the airline adds up to 11% more seats to its domestic flying.                                                                                                                          

Chief financial officer Gareth Evans acknowledged there is already yield pressure due to increased capacity but stressed it was necessary to maintain Qantas’ 65% “profit maximising” domestic market share.

From a medium to long term perspective it is the right thing to do, he said.

“The key to our domestic profitability is a market share of 65%. That’s the profit maximising position,” Evans said.

“We have demonstrated that this year with a combined EBIT (earnings before interest and tax) of $600 million. A lot of capacity is being added by our competitors so we are responding to that to hold on to that profit maximising point.”

In the short term, it did mean there would be pressure on yields “and we are seeing the effects of that now”, he said.

“But we have demonstrated over a long period of time that in the medium to long term, holding that frequency and network advantage does give us a disproportionate share of revenue and a profit maximising position,” Evans said.

Meanwhile, Qantas chief executive Alan Joyce stressed the airline does have the right fleet despite the cancellation of 35 fuel efficient Dreamliner 787-9s.

While positive from a capital investment perspective, analysts believes it sends out the wrong message at a time when other carriers are investing heavily in new aircraft and product.

Joyce said the average age of its aircraft is now 8.3 years, “the lowest since privatisation and highly competitive by international standards”.

He added that many airlines around the world would be envious of its underlying pre-tax profit of $95 million.

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