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Competition creates headwinds for Qantas and Virgin

November 4, 2016 Headline News No Comments Email Email

egtmedia59Qantas celebrations of an all-time-record annual profit have been followed by a 3% decline in revenue in the first quarter of 2017 – and Virgin Australia has hit very similar headwinds.

The Qantas Group blamed the 3% decline on increased competition on international routes and a subdued domestic demand environment in the first two months of the year.

“With continued cost improvement from the Qantas Transformation program and lower fuel prices secured through hedging, the Group expects to deliver a first half underlying profit before tax in the range of AUD 800 million to AUD 850 million,” a company statement said. That range would represent the third-best first-half result in Qantas history, it pointed out.

Group revenue for the three-month period ending 30 September 2016 of AUD 3.98 billion compared to revenue of AUD 4.11 billion in the first quarter of financial year 2016.

Passengers carried rose 2.5% to 13.2 million, driven by capacity (Available Seat Kilometres) growth of 2.2%. Group Domestic and Jetstar Domestic) unit revenue decreased by 2.9% in the first quarter compared to the previous year period.

Virgin Australia posted a net loss for the quarter of AUD 34.6 million, a total which includes restructuring charges under the group’s Better Business program. The underlying pre-tax loss was AUD 3.6 million.

Domestic flying accounts for a greater proportion of Virgin Australia’s business than is the case with its rival Qantas.

The Virgin Australia group saw passenger numbers grow by 4.8% and revenue load factor increase by 2%. The carrier says savings from its Better Business program are already flowing through and are expected to grow to AUD 300 million annually by the end of the 2019 financial year.

Written by Peter Needham

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