The Qantas Group has released its third-quarter results for FY19, highlighting corporate travel revenue growth and the sale of its Melbourne domestic terminal.
The company said it remains on track to fully offset the impact of significantly higher fuel costs compared with last year, posting 2.3 per cent revenue growth in the first three months of 2019 to $4.4 billion. Group unit revenue was up by four per cent.
The airline noted that the increase in revenue this quarter came despite a shift in the timing of Easter, which commenced in the third quarter of FY18 (Sunday 1 April), moving wholly into the fourth quarter of FY19 (Sunday 21 April).
This resulted in revenue moving into the fourth quarter, with a favourable alignment between public holidays and school holidays driving very strong leisure travel demand, Qantas said.
Normalising for this shift, group RASK for the quarter grew by 5.5 per cent, measured by ticketed passenger revenue per available seat kilometre.
Qantas said continued capacity discipline in group domestic (down 1 per cent) and group international (down 1.9 per cent) assisted with yield management and recovery of fuel costs.
Group domestic unit revenue increased by 1.1 per cent, in line with company expectations accounting the Easter timing shift. The airline said continued strengthening in the resources market offset weakening demand in other parts of the corporate market.
Qantas’ overall market share of corporate travel revenue increased by 2.5 percentage points in the quarter to its highest level in three years, despite a net reduction in capacity.
“Domestically, demand is mixed,” Qantas CEO Alan Joyce said in a press statement.
“The resources sector continues to grow and we’re capitalising on that with a lot of extra flying in Western Australia and Queensland.
“Leisure demand was very strong over Easter and is holding up well, and we’re pleased with our growing share of the corporate and small business segments.
Joyce said the airline was seeing increased softness in parts of the domestic corporate market for May and June – in particular, financial services, telecommunications and some areas of construction.
“Growth is also slowing in the small business market. We’ll have a better sense of how temporary this is after the Federal Election, which always has a dampening impact on travel demand,” he said.
Market share of small-to-medium business travel continued to grow, assisted by initiatives from Qantas Loyalty.
Group international unit revenue increased by 6.2 per cent over the quarter, with a particularly robust performance by Qantas International.
The airline said network changes drove revenue performance, as well as competitor capacity reductions on long-haul routes in response to higher fuel costs.
“Internationally, the outlook is positive and continues to improve,” Joyce said.
“The long-term fleet and network changes we’ve made are delivering revenue growth, and total market capacity in the fourth quarter is contracting in response to higher fuel prices.”
Performance of Jetstar’s international services was heavily impacted by the timing of Easter and school holidays, with a significant amount of demand shifting to April.
Despite this, unit revenue continued to grow. The broader Jetstar Group saw an eight per cent increase in ancillary revenue per passenger in the third quarter, supported by new luggage options and Club Jetstar membership.
Qantas Loyalty continued to see strong revenue growth from the Frequent Flyer program as well as its other businesses, including Qantas Money and Qantas Insurance.
The company noted several initiatives to be announced in the fourth quarter that will continue to support Loyalty’s performance, with earnings growth of seven to 10 per cent expected for the second half of FY19.
The Qantas Group expects to achieve a record level of revenue this financial year.
Melbourne terminal sale
Meanwhile, Qantas and Melbourne Airport have reached an agreement for the sale of domestic Terminal 1, currently owned by the airline.
Qantas has secured future access to the terminal with a 10-year access agreement for $355 million, with $276 million to be received in cash this financial year. The company says the remaining value will be accrued in the future.
The transaction includes all of Qantas’ aeronautical and retail assets transferring to Melbourne Airport, while the airline will retain exclusive access to Terminal 1, including lounges, for domestic services.
Options to operate some international flights from Terminal 1 outside of peak domestic times will be assessed.
Joyce said it was great that Melbourne Airport was taking a “commercially rational” approach to make the deal possible. However, he highlighted the need for an independent arbitrator for airports that “aren’t commercially rational.”
“That’s why we’re continuing to argue for regulatory change,” he said.
World’s first zero-waste flight
Yesterday, Qantas revealed it would make history as the world’s first airline to operate a zero-waste flight, in a test-flight from Sydney to Adelaide.
After plotting an ambitious path toward becoming the first airline in the world to go closed-circle on aircraft waste, the flight marks the start of Qantas’ plan to fully cut single-use plastics on flights by end-2020.
This comes after the Qantas Group announced in February that it would replace paper tickets by the end of this year, and that it aimed to eliminate three-quarters of its waste by end-2021.
All inflight products on board QF739, flying from Sydney to Adelaide and staffed by cabin crew were either composted, recycled or reused, the airline said.
Speaking yesterday at the flight’s departure, Qantas Domestic CEO Andrew David said the trial flight was an important milestone for the national carrier’s plan to cut waste.
“In the process of carrying over 50 million people every year, Qantas and Jetstar currently produce an amount of waste equivalent to 80 fully-laden Boeing 747 jumbo jets,” he said.
“We want to give customers the same level of service they currently enjoy, but without the amount of waste that comes with it.”
David said this flight would typically produce 34 kilograms of waste – with the Sydney to Adelaide route producing 150 tonnes of waste annually.
“This flight is about testing our products, refining the waste process and getting feedback from our customers,” he said.
About 1000 single-use plastic items were substituted with sustainable alternatives or removed altogether from the flight, including individually-packaged servings of milk and Vegemite.
Alternative products used during the flight include meal containers made from sugar cane and cutlery made from crop starch, all of which is fully compostable.