The Qantas Group continued to deliver revenue growth in the first quarter of FY20, up 1.8% to a record $4.56 billion, compared with $4.49 billion in the prior corresponding period.

Qantas has posted record first-quarter revenue but flagged a profit hit of up to $55 million from protests in Hong Kong and the ongoing trade war.

The carrier’s Q1 record was mostly thanks to a 4.4% jump in international revenue and strong growth at Qantas Loyalty. This offset a drop in demand for domestic leisure.

Qantas Group CEO Alan Joyce said the record revenue result for quarter one showed the national carrier was positioned well to respond to continued mixed market conditions.

“The Group continues to perform well, with strength in key parts of our portfolio helping to offset softness in other areas,”

Alan Joyce, Qantas Group CEO

 

Key developments across the Group, since 1 July 2019

Qantas-test-flight

  • In-principle approval of a second Haneda slot for Qantas International, with additional Australia-Japan services starting in April 2020.
  • The arrival of the ninth Qantas Dreamliner and the retirement of another 747, leaving six in the fleet. Two more Dreamliners will be added to Qantas International by the end of the 2019 calendar.
  • Regulatory approval for a new joint business with American Airlines, and the announcement of two associated routes: Brisbane to Chicago and Brisbane to San Francisco.
  • Completion of the first of three Project Sunrise research flights, with the first direct commercial airline flight from New York to Sydney cutting three hours of total travel time.
  • Completion of the first of 12 Airbus A380 cabin upgrades, providing a 27% increase in premium seating to meet demand and improve the economics of these aircraft.
  • Qantas Frequent Flyer announced a new customer loyalty partnership with BP which will allow customers to earn Qantas Points on fuel and purchases in service stations.
  • Woolworths Rewards and Qantas Frequent Flyer revamped its decade-long partnership to make the tie-up simpler and more rewarding, with points earned on groceries increasing by almost 15%.
  • Expansion of Qantas Business Lounge in Singapore complete with the new First Lounge to open in November.

 

Domestic

Karry On - Qantas

“Domestically, published competitor capacity is set to increase despite the weakness in the market. The Qantas Group will maintain its strategic position in all parts of the market and therefore our total domestic capacity is expected to grow by up to 1 percent in the second half.”

Alan Joyce, Qantas Group CEO

Group Domestic Unit Revenue fell by 0.9% due to mixed market conditions.

Overall, corporate travel demand was flat and small business travel demand growth slowed – but Qantas’ market share in both these segments continued to increase. Premium leisure demand remained steady.

Demand in the price-sensitive leisure market weakened. Jetstar’s Unit Revenue fell by 2.6 percent and accounted for most of the RASK decline in Group Domestic. However, Jetstar did benefit from higher load factors that supported ancillary revenue growth.

 

International

Karry On - Qantas

Group International Unit Revenue increased by 4.4%. This was led by a reduction in competitor capacity as well as benefits of network and fleet changes in Qantas International, which had its own capacity decrease of 2.5% and a Unit Revenue increase of over 6%.

“Qantas International has seen significant upside from competitor capacity contracting more than anticipated, which is expected to continue for at least the remainder of the first half.”

Alan Joyce, Qantas Group CEO

Protests in Hong Kong will negatively impact the Group’s first-half profit performance by $25 million, with an ongoing capacity reduction in place to minimise the second-half impact.

Further deterioration in global trade conditions has impacted freight demand with an expected profit impact of $25-30 million for the full year.

Qantas Loyalty continued to see strong revenue growth in line with expectations, with improvements to the Frequent Flyer program delivering increased member engagement during the period.

 

Outlook

Karry On - Qantas

Qantas CEO, Alan Joyce

“Given the slower revenue environment, we have a strong focus on cost reduction to make sure we keep delivering on our transformation targets. Part of this is about taking opportunities to reduce complexity and constantly improving how efficiently we manage our business,”

 Alan Joyce, Qantas Group CEO

The Group has fully hedged its fuel for FY20 with the ability to benefit from significant price falls. However, recent currency movements will increase non-fuel costs by a further $25 million in the first half.

The Group remains on track to deliver at least $400 million in transformation benefits in FY20, with an increased focus on cost reduction initiatives in the second half.