No apologies from Joyce for Qantas’ super profit

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Regardless of whether travellers see Qantas’ $2.5 billion profit as rudely excessive, its chief executive Alan Joyce isn’t apologetic for his swansong result.

Qantas didn’t just better its profit record – it smashed it.

Alan Joyce makes no apologies for Qantas’ blockbuster profit.

Joyce has long been a divisive business leader, and the shareholders that see him as an aviation god will characterise this result as further evidence of his genius. At Thursday’s close of his last presentation to investors and analysts, he was farewelled with a rousing round of applause. His replacement, Vanessa Hudson, said the airline was “truly blessed you have been our leader”.

Both these are ones for the books.

It’s probably safe to say that for better or worse, we may never see another Joyce.

He is prepared to weather the criticism from his customers, who loudly complain about on-time service (or the lack thereof), high fares and the inability to use their points on classic rewards seats.

Joyce happily batted back questions about the federal government’s refusal of Qatar’s application for additional flights into Australia – saying it would distort the market, while noting it was a government decision.

On the still-elevated level of flight cancellations, particularly out of Sydney, Joyce said weather and flight control issues were the culprits, not Qantas.

And on claims that Qantas has been slow to deal with its bank of yet-unredeemed flight credits, Joyce said the airline was doing everything it could to encourage people to use them.

Joyce is clearly not fretting about what the cost-of-living crisis may do to his customers. Rather, he is buoyed by the fact that the cost-conscious travellers are booking Jetstar flights in droves.

It’s probably safe to say that for better or worse, we may never see another Joyce.

Qantas was floored by COVID, but hasn’t yet felt the financial effects of a slowing economy and says it’s uniquely positioned to navigate macroeconomic conditions.

Cash-strapped consumers are buying fewer clothes and appliances, and are stocking up on cheaper house brands in supermarkets, but everyone needs a holiday, so forward bookings for flights remain strong.

The company’s research found that twice as many people planned to travel domestically in the next year as before the pandemic, and 80 per cent more wanted to travel internationally.

Spending intentions in the survey showed consumers intended to spend 31 per cent more on international travel and 26 per cent on domestic trips, but 22 per cent less on beauty, 18 per cent less on clothing and 16 per cent less on homewares.

This is despite fares – particularly international fares – stubbornly remaining above pre-COVID levels.

Joyce’s appearance next week at a parliamentary inquiry into the cost-of-living pressures for Australian households should be a large-bucket popcorn event.

So how has Joyce managed to drive this level of profitability?

First and foremost, he has been a ruthless cost-cutter – having taken $1 billion from the airline group’s cost base since COVID. Indeed, he used the pandemic as leverage to reset costs.

And the toughness of Joyce’s industrial relations approach is legendary.

The very gradual revamping of flights to pre-COVID levels has also proved to be a boon for airlines including Qantas – because it kept supply below demand, enabling them to charge higher fares.

And the aviation industry has been blessed with the public’s thirst for travel post-COVID after the pandemic era of lockdowns and closed borders.

“Travel demand is incredibly robust, and we’ve taken delivery of more aircraft and opened up new routes to help meet it,” Joyce said.

The post-Joyce executive team now has to convince shareholders that this profit is not the sweet spot, but the start of a new sustainable step-up in profits for the airline.

The company has a massive fleet replacement job ahead over the next decade, which it says it has the balance sheet strength and cash flow to pay for.

Qantas believes the better product and route flexibility that these new planes will deliver is something the travelling public will be willing to pay for.

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