Qantas domestic, international fares up by 3 - 3.5%

29 April, 2008:

Qantas Airways Limited, Australia’s national airline and the country’s biggest, has decided to raise air fares from May 9, 2008, in an effort to combat the soaring aviation fuel prices and to maintain profitability.

A statement from the airline said that international fares will rise by about 3% and domestic fares by about 3.5%.

Jetstar, Qantas’ budget-airline subsidiary, which operates out of Christchurch to several Australian cities, too, is in the process of reviewing its fare levels.

In mid-April 2008, Qantas’s rival in the domestic market, Virgin Blue Holdings Limited, , had more than halved its profit expectations for 2008 keeping in mind high fuel costs and increased competition.

Geoff Dixon, chief executive of Qantas, was quoted by the media as saying, “While higher fuel prices remain a concern, the group’s fundamentals remain strong with its flying businesses well positioned in their markets. We remain confident of meeting our guidance for a 2007-08 result of a least 40% higher than the 2006-07 reported profit-before-tax despite prices of jet fuel having soared 73% over the past year to a record $144.49 a barrel in April 2008.”

The price hike in base fares was necessary, Dixon said, to help bridge the widening gap between the actual increase in the cost of fuel and the amount offset through surcharges. “The group had been able to manage higher fuel costs to date through hedging, its two-brand strategy and sustainability gains.”

Qantas had, in 2007, reported a pre-tax profit of Australian $1.03 billion (US $963), which was up from the $671.2-million profit a year before.

Geoff Dixon added that Qantas had “implemented a hiring freeze and a cutback on non-essential expenditure to minimise the impact of fuel prices and had also decided that it was prudent to suspend its share buyback.”

Geoff Dixon explained further, “Aviation has been a beneficiary of globalisation and Qantas is well-placed to take advantage of this. This is one of the reasons why the airline is not changing its 2007-08 profit outlook. People are out there, travelling around the world – to China and the United States, you name it – and they’re going to continue to travel.”

Since the buyback started in September 2007, Qantas had bought back shares worth over $500 million.