It’s been a rough couple of months for Alan Joyce and the Flying Kangaroo. As CEO of Qantas, Australia’s largest airline, Joyce has been plagued with a series of misfortunes and bad press for the last couple of months. The A380 engine failure episode drove down its November international market share to a new low of 18.7 percent. A Qantas flight scheduled to pick up stranded Aussies didn’t make it to calamitous Cairo on time.
The latest announcement certainly won’t help Qantas reputation at this stage. International fuel surcharges—read: ticket prices—are going up on February 19 due to increases in oil and jet fuel costs.
Joyce said, “Year to date average prices for both West Texas Intermediate Crude Oil and Singapore Jet Fuel are at their highest since FY08, and second half FY11 prices are forecast to be around 20 per cent higher than in the first half.”
"The price of Singapore Jet Fuel, for example, has increased from an average of US$88 a barrel in September 2010, to US$110 a barrel in January 2011, and is US$117 a barrel today,” he added.
While Qantas has held out longer than any other airlines have already responded to the increase and hiked up fuel surcharges and fares, the latest bad news follows what seems like a string of constant bad news.
A day after Qantas made the fuel surcharge increase announcement, Joyce met with the Melbourne Press Club to discuss the future of the airline. He said that an increase in airline capacity has flooded Australia from China, the Middle East and elsewhere.
“To give you an idea, total growth in direct aviation capacity to Australia between 2003 and 2009 was 39 percent. Meanwhile total inbound passenger growth was only about 10 percent. So that tells us these carriers are not growing the market, but simply taking existing demand. And the result is thatQantas International market share has fallen from 35 percent to 20 percent. Meanwhile the majority of our Qantas assets are tied up in this part of the business and it absorbs the majority of our capital expenditure,” Joyce said.
With increased competition, increased costs and increased uncertainty about Qantas International, Joyce is going to have start getting creative with ways to boost the Flying Kangaroo’s profits—and reputation—very soon.
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