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Qantas grows corporate travel, will sell MEL terminal

May 10, 2019 Headline News No Comments

Qantas’ overall market share of corporate travel revenue has reached its highest level in three years, indicating that Virgin Australia’s longstanding effort to wrest corporate business from its larger rival is still very much an uphill task.

Outlook for Qantas was positive internationally, whereas domestic demand was “mixed”, the airline’s chief executive Alan Joyce said yesterday.

Qantas revealed that its overall share of corporate travel revenue increased by 2.5% in the third quarter of the financial year (ending 31 March 2019) – despite a net reduction in capacity. Market share of small-to-medium business travel continued to grow, assisted by initiatives from Qantas Loyalty.

Qantas revealed it has reached agreement with Melbourne Airport for the sale of the airline’s domestic terminal.

Qantas has successfully settled the sale of the terminal and secured future access to Terminal 1 for AUD 355 million, of which AUD 276 million will be received in cash in this financial year, with the remaining value to be accrued in future periods.

Qantas chief executive Alan Joyce

The transaction includes a 10-year access agreement for Terminal 1 with all aeronautical and retail assets transferring to Melbourne Airport. Qantas retains 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.

“It’s great that Melbourne Airport was prepared to take a commercially rational approach to make this deal possible,” Joyce commented.

“Unfortunately, the current system doesn’t have an independent arbitrator for airports that aren’t commercially rational, which creates a stalemate around these critical pieces of infrastructure. That’s why we’re continuing to argue for regulatory change.”

Group international unit revenue increased by 6.2% “with a particularly robust performance by Qantas International”, the carrier stated. Network changes drove revenue performance, as did competitor capacity reductions on long-haul routes in response to higher fuel costs, which in-turn led to increased market share for Qantas International.

Joyce said the third quarter FY19 figures showed the national carrier remained in a fundamentally strong position.

Qantas Boeing 787-9 Dreamliner

“The Group continues to perform well, with strength in key parts of our portfolio helping to hedge against headwinds in other areas.

“Internationally, the outlook is positive and continues to improve. 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.

“Domestically, demand is mixed. 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.

“We’re seeing increased softness in parts of the domestic corporate market for May and June, particularly 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.

“Overall, we expect the Group to achieve a record level of revenue this financial year and strong cash flow as we continue to deliver for shareholders, customers and our people.” 

Key developments across the Qantas group since 1 January 2019 include:

  • Retirement of another 747, leaving eight in the fleet; an additional 747 is due for retirement by the end of FY19.
  • Announcement of Sydney-San Francisco as the next Qantas Dreamliner route from December 2019, replacing the less fuel efficient 747 currently used.
  • Signing of a three year wet-lease with Atlas Air to upgrade the two existing 747-400 freighters operated for Qantas Freight with two 747-8F aircraft from July 2019 . These will deliver 20% more carrying capacity and better operating efficiency.
  • Announcement of a new Jetstar route from Gold Coast to Seoul, Korea (opens in new window) and a new Qantas seasonal route from Sydney to Sapporo, Japan, starting in December 2019.
  • Start of new Qantas routes including Sydney-Bendigo, Adelaide-Uluru, Darwin-Uluru, Cairns-Port Moresby and Sydney-Fiji in response to market demand.
  • Release of a report card on 12 months of the Perth-London route, which has maintained an average load factor of over 90 per cent and the highest satisfaction rating on the Qantas International network.
  • Changes to the Group Management Committee, including Chief Financial Officer and Qantas International CEO roles.
  • A world-first ‘zero waste’ flight as part of testing the on-board products required to reach the Group’s goal of reducing waste to landfill by 75% by 2021.

Written by Peter Needham

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