Qantas record profit: delight for shareholders, distrust and derision from customers

Qantas experienced a year full of remarkable figures – ranging from extremely high profits and margins to ticket prices and customer grievances. Although shareholders and executives might be satisfied with these outcomes, the airline still confronts significant obstacles and adversaries.

The company's previous record in 2018, with a profit of $1.6bn, now appears insignificant compared to the current full-year underlying profit of $2.47bn. This tremendous growth in profits can be attributed to the strong demand for travel, increased air fares, lower prices of jet fuel, and a significant reduction of the company's operating costs.

In the time before the pandemic, the Qantas group, along with Jetstar, was making a profit on the capital it invested at a rate of approximately 20%. However, in the years 2022-23, this metric surged to an astonishing 103.6%, an unexpectedly high figure that may seem like an error at first glance.

Qantas has experienced a significant boost in its domestic operating margins, with an impressive increase of 50% in profit margins over the last six years. This surge has propelled their domestic aviation operation to an outstanding 18.2% margin, surpassing the usual profit margins seen in Australia's domestic airline industry, which typically range between 8 and 10%.

The sheer magnitude of the profit might potentially become a focal point amidst increasing dissatisfaction regarding certain companies' capacity to generate massive earnings at a time when living expenses are skyrocketing.

Only a year ago, Joyce had been declaring a tremendous deficit of $1.86 billion. However, on Thursday, the departing CEO, who has been leading Qantas since 2008, was sharing the incredible journey of going from being dangerously close to bankruptcy during the pandemic to achieving a financial state that is now the most robust it has ever been.

The company has managed to make great profits by charging expensive tickets and reducing the number of available seats. This has been partly due to staff shortages and problems with supplying aircraft. As a result, they have earned a lot of money while keeping costs down, but this has negatively affected travelers.

This has emphasized the noticeable difference between the encounter of its clients and shareholders.

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While numerous airlines have regained profitability in the previous year, only a handful have bounced back as robustly as Qantas.

Air Zealand experienced a substantial increase of 132% in its revenue according to its latest annual financial report, which was also disclosed on Thursday. However, despite this positive news, its share price is still suffering from the effects of the pandemic-induced sell-off. A comparable situation can be observed with International Airlines Group, the parent company of British Airways, and American Airlines Group, as both companies have also seen a decline in their share prices.

However, the stock price of Qantas, which increased once more on Thursday, has rebounded and is now trading close to the highest levels seen in the 2019-2020 period, almost as though the disruptions caused by the pandemic never occurred.

Additionally, we cannot overlook the alternate change that Qantas has experienced.

The soaring kangaroo had always been one of Australia's most reliable trademarks, and although some of that perception is associated with its flawless safety history, Qantas's standing for excellent customer care was severely damaged due to its mishandled luggage ratio, subpar punctuality, and skyrocketing airfare costs during the latter part of last year.

Qantas is no longer considered one of the most trusted brands. In the latest version of Roy Morgan's rankings, which were published last week, it has now been included in the distrust index and is ranked as the 13th most distrusted brand in the economy. Surprisingly, Qantas is held in lower regard than its own budget airline, Jetstar.

In the meantime, Qantas received the highest number of complaints reported to the Australian Competition and Consumer Commission during the 2022-23 period. Additionally, it experienced a significant drop of 12 positions, landing at the 17th spot on the esteemed global ranking of top airlines.

During a media briefing where the outcomes were disclosed, Joyce dismissed allegations stating that Qantas has been deliberately coordinating and subsequently canceling flights departing from Sydney airport. These actions were supposedly aimed at hindering rival airlines from obtaining the limited opportunities for takeoff and landing.

Around 10% of the flights between Sydney and Melbourne get canceled, and Qantas, which holds a dominant 66% share in domestic aviation, significantly impacts this statistic.

Although various entities such as the industry itself, airports, the Productivity Commission, and an independent review have voiced the need for changes to the regulations that have allegedly allowed dominant airlines to manipulate the system, Joyce firmly disagrees. He believes that the foundation of these claims is simply incorrect and that they are driven solely by the self-serving agenda of the Sydney airport, which he considers to be a monopoly.

Joyce further supported Qantas's resistance towards the increased capacity proposal of Qatar Airways to enter Australia.

In a period of persistently expensive air tickets, and with Qantas's ability to operate international flights at pre-Covid levels not expected to resume until next year, Qatar's growth was backed by the tourism and aviation industries, state leaders, and its collaborator Virgin Australia.

Qantas can express gratitude to the Albanese government for their stance on the slots and Qatar matters. The government's denial of Qatar's growth plans has been based on various factors, one of which is directly related to Qantas's recent capital injection in their fleet. Transport Minister Catherine King has cited this as one of the justifications behind the decision.

The King has also disregarded requests for immediate changes to Sydney's regulations on slot allocation until after the aviation white paper, which is already delayed from its planned release in the middle of next year.

Next, we have the imminent legal disputes.

It is confronted with an enormous payout that may exceed tens of millions of dollars if the supreme court supports a ruling made by a federal court that discovered Qantas unlawfully subcontracted 1,700 jobs in ground handling at the start of the global health crisis.

This week, Qantas was informed about a legal case where it is being accused of using travel credits to treat customers' funds as loans without any interest, amounting to over "$1bn".

Thursday’s figures did not specifically highlight either as potential legal compensations.

Similar to the large financial institutions and prominent grocery chains, Qantas has effectively capitalized on the market circumstances to achieve financial gain.

Given the government's apparent focus on safeguarding Qantas from rivals, it wouldn't come as a shock that the newly appointed CEO, Vanessa Hudson, remains hopeful that there are even better outcomes on the horizon.