Photograph: Phil Noble/Reuters
Qantas has flagged it may increase already high ticket prices in response to rising jet fuel costs, in a pricing decision that would heap further pressure on an airline trying to rebuild its tarnished brand.
The airfare warning comes as the national carrier faces customer fury over withheld travel credits, poor service and allegations it sold tickets for thousands of already cancelled flights. It also illegally outsourced 1,700 ground handler jobs.
In a market update on Monday, Qantas pledged to invest $80m in customer improvements. But it also said it might adjust air fares if current fuel price levels were sustained in the weeks ahead.
“Any changes would look to balance the recovery of higher costs with the importance of affordable travel in an environment where fares are already elevated,” the airline said.
The link between aviation fuel and ticket prices has long been contentious, with airlines typically raising prices promptly when oil costs increase, but acting with less haste when the reverse occurs.
Qantas recently delivered a record annual profit, far exceeding pre-pandemic profit levels. One of its main financial metrics, return-on-invested-capital, hit 103.6%, compared with about 20% in the years leading up to 2020.
The Transport Workers’ Union (TWU) national secretary, Michael Kaine, said service standards had plummeted while ticket prices had surged.
“An eye-watering $2.5bn record pre-tax profit shows it is not disappointed customers that should be copping higher fares but the airline that wants us to believe it is ready to change its ways,” Kaine said.
The airline said on Monday fuel prices had increased by about 30% since May 2023, driven by a combination of higher oil prices, higher refiner margins and a lower Australian dollar. If sustained, Qantas’s fuel bill will increase by approximately $200m to $2.8bn in the six months to December, according to the market update.
“The group will continue to absorb these higher costs, but will monitor fuel prices in the weeks ahead and, if current levels are sustained, will look to adjust its settings,” Qantas said.
While jet fuel prices have risen recently, they are still lower than at the start of 2023, according to the global jet fuel price monitor. The jet fuel index is also still down more than 20% from mid-2022 peaks.
Qantas and rival airlines also use hedging strategies to smooth volatile price movements.
The airline’s ticket price warning threatens to derail a campaign to win back customer support which included an apology from the new chief executive, Vanessa Hudson, who promised to return the airline to its former esteem after a “humbling period”.
Pressure is also mounting on the Qantas chairman, Richard Goyder, to step aside, even after the now former chief executive Alan Joyce brought forward his own retirement.
“We need a total reset and a fresh start – including with a new board,” the TWU said on Monday.
Goyder, who is also the chair of Woodside and the AFL, has vowed to stay in the job to help Qantas rebuild its reputation.
Shareholders will be able to express their discontent at the company’s annual general meeting in early November. However, the chair’s role is not up for re-election.
On Monday, the airline said it would significantly invest in customer improvements this financial year, funded by profits.
The money is designed to address various customer “pain points”, such as increasing the number of seats that can be redeemed with frequent flyer points.
