If you’ve noticed a change in Qantas ticket prices, it’s because the airline is ‘passing on’ its costs to passengers amid rising fuel costs.
While addressing the media during the airline’s full-year results for 2022, Qantas CEO Alan Joyce said the airline will continue to pass on higher fuel costs to its customers.
Qantas has confirmed that it will increase domestic airfares by 10 per cent and international fares by 20 per cent while at the same time cutting flights to around 93 per cent of 2019 levels.
The changes will add up to $300 to some flights.
“It is fair to say that we have seen a dramatic increase in fuel,” Joyce told reporters on Thursday.
“For this year, we forecast that we will be 60 percent higher in fuel costs than in 2019 before Covid.
“That means we’re going to have a billion dollars more on the fuel bill compared to 2019, and we’re only going to have 75 percent of our international flights and less than 100 percent of our domestic flights, so that’s a big increase in costs.”
“We will continue to offer value to people, but it is a cost that we have to pass on; It is a cost that we cannot digest given what we have been through.”
It comes as Joyce also announced the airline will cut flights on some of its busiest Australian routes as it struggles to cope with high fuel prices and airport staff shortages.
It will reduce national capacity until March 2023.
In a statement, Qantas said the impact on customers was expected to be “minimal” as flights would be removed “mostly from high-frequency routes”.
“Those affected will be contacted directly with alternatives as close to their original time as possible, usually within an hour or two,” the statement read.
There are no changes to the airline’s international flights.
The airline has been able to recover the cost of high fuel prices in the international market through higher fares, but has not been able to do so in the domestic market, Joyce said in June.
Tourism expert Dr. David Beirman said that since Qantas announced a $1.19 billion loss from
fiscal year 2021-2022, in addition to a loss of more than $5 billion the previous year, the airline, along with others, is not in a position to participate in long fare discount periods for the foreseeable future.
“There were some cheap fares in late 2021 and early 2022 to stimulate demand when travel started to make a big uptick after Covid restrictions were relaxed in Australia and internationally,” said Dr Beirman, of the University of Technology Sydney, at news.com.au.
However, he said Qantas’ need to recoup past losses, the added costs of rehiring workers laid off during the pandemic and rising fuel costs amid Russia’s invasion of Ukraine mean it is almost “inevitable” that airfares will rise and fuel prices will remain high. this year and possibly until 2023.
“Alternative fuels, which are being pursued by all airlines, including Qantas, may present a slim chance of tackling fuel prices in the medium to long term,” Dr Beirman said.
“But I think it’s likely that all those millions of people who want to resume air travel will probably find it more expensive in 2022 and 2023 than in the pre-Covid years.”
Dr. Beirman said that one thing that all airlines are very aware of is that fuel is the largest cost component for airlines.
“[It] it represents 40 percent of costs for full-service carriers like Qantas and more than 50 percent of costs for low-cost carriers like Jetstar.”
Following Qantas’ announcement of a new route from Australia to New York, via Auckland, Dr Beirman said the possible reason the airline is interested in long-haul flights is that fuel costs per kilometer they are lower than domestic short-haul flights.
“In simple terms, the longer and higher they are in the air, the less fuel they consume per kilometer. Takeoffs and landings really burn fuel.”