Half-empty planes are bad news for Qantas, but worse for its rivals
Qantas can turn a profit while flying far emptier planes than its rivals thanks to its aggressive pandemic cost-cutting drive, which analysts say will help shield it from competitors Virgin Australia, Rex Airlines and new challenger Bonza. As the Omicron wave again delays the aviation industry’s COVID-19 recovery, Jarden analyst Jakob Cakarnis estimates Qantas and its budget arm Jetstar are the carriers best placed to rebound after the group moved to cut its cost base by about $1 billion when the pandemic struck. On average, planes flying around Australia had passengers on 80 per cent of their seats before the pandemic and that has fallen to about 55 per cent over the past 12 months, Mr Cakarnis said, putting pressure on the airlines’ finances. Qantas’ two brands can fly profitably with the fewest passengers on board, he estimated, with Jetstar needing to fill only 43% of seats to break-even, and Qantas aircraft needing to fill 55%. In contrast, he estimated that Virgin’s break-even “load factor” was 76% while Rex – which last year launched jet services between capital cities to compete directly with Qantas and Virgin - needs to fill 80% of seats. Rex deputy chairman John Sharp said this estimate was “wrong by a wide margin” but would not provide the accurate figure. Across its two brands, Qantas’ break-even load factor had fallen from 57 to 49% (excluding fuel) thanks to its cost-cutting efforts, which included laying off almost one-third of its workforce. Virgin’s had increased by 6 percentage points despite also cutting costs since its stint in administration early in the pandemic, Cakarnis said, because it had also lowered its airfares. “Qantas is the best placed to weather the lower load factors realised during the ‘recovery phase’, based on our analysis,” said Cakarnis. “A combination of the lowest cost position for Jetstar and ongoing benefits from a corporate cost-out program for Qantas Domestic has put the business in a strong competitive position.”<br/>
https://portal.staralliance.com/cms/news/hot-topics/2022-01-28/oneworld/half-empty-planes-are-bad-news-for-qantas-but-worse-for-its-rivals
https://portal.staralliance.com/cms/logo.png
Half-empty planes are bad news for Qantas, but worse for its rivals
Qantas can turn a profit while flying far emptier planes than its rivals thanks to its aggressive pandemic cost-cutting drive, which analysts say will help shield it from competitors Virgin Australia, Rex Airlines and new challenger Bonza. As the Omicron wave again delays the aviation industry’s COVID-19 recovery, Jarden analyst Jakob Cakarnis estimates Qantas and its budget arm Jetstar are the carriers best placed to rebound after the group moved to cut its cost base by about $1 billion when the pandemic struck. On average, planes flying around Australia had passengers on 80 per cent of their seats before the pandemic and that has fallen to about 55 per cent over the past 12 months, Mr Cakarnis said, putting pressure on the airlines’ finances. Qantas’ two brands can fly profitably with the fewest passengers on board, he estimated, with Jetstar needing to fill only 43% of seats to break-even, and Qantas aircraft needing to fill 55%. In contrast, he estimated that Virgin’s break-even “load factor” was 76% while Rex – which last year launched jet services between capital cities to compete directly with Qantas and Virgin - needs to fill 80% of seats. Rex deputy chairman John Sharp said this estimate was “wrong by a wide margin” but would not provide the accurate figure. Across its two brands, Qantas’ break-even load factor had fallen from 57 to 49% (excluding fuel) thanks to its cost-cutting efforts, which included laying off almost one-third of its workforce. Virgin’s had increased by 6 percentage points despite also cutting costs since its stint in administration early in the pandemic, Cakarnis said, because it had also lowered its airfares. “Qantas is the best placed to weather the lower load factors realised during the ‘recovery phase’, based on our analysis,” said Cakarnis. “A combination of the lowest cost position for Jetstar and ongoing benefits from a corporate cost-out program for Qantas Domestic has put the business in a strong competitive position.”<br/>
