Over the last few months, an increasing number of airline CEO’s have issued stark warnings about the potential impact that rising oil prices will have on the aviation industry. Jet fuel prices have been rising steadily since late 2015 and now stand at an average of nearly $90 a barrel – the last time fuel prices were that high was back in 2014.
But it’s an issue that doesn’t seem to be causing Qantas chief executive, Alan Joyce sleepless nights – despite the fact that his airline’s fuel bill has increased this year by a massive $860 million.
“We are seeing a big improvement in our revenue that is covering the increase in oil – substantially covering it,” Joyce said in an interview with business channel Bloomberg today. He cited an 8% increase in forward bookings for much of the success – built on the back of a strong Australian economy and consumer demand for ultra-long-haul flights.
But Joyce warned customers that ticket prices might be about to rise. “The consumer has never had it so good,” he commented. “The aviation industry is an amazing business – we’ve seen in Australia that in the last 10 years average airfares have gone down by 45% – that’s at the discount level.”
“I don’t think there would be any other product that’s had that level of discounting. It’s a very efficient industry and it passes on that efficiency to the consumer over time. We’re now having to keep that efficiency to offset (the price of) oil.”
But Joyce thinks passengers are willing to pay more to fly Qantas – in particular, the airline’s new breed of ultra-long-haul flights like the 14,498km, 17-hour service from Perth to London that Qantas launched earlier this year.
“People are paying a premium to fly London to Perth,” Joyce commented, as he went on to say that the flight was currently operating with an average load factor of 94%. The service even receives the highest customer ratings across the Qantas network.
“Why?” asks Joyce. “Because we designed the aircraft product for long-haul flights,” he explains, saying research by the University of Sydney helped the airline make informed decisions as to how it should shape the product.
In a next few years, Qantas plans to utilise newly delivered Boeing 787 Dreamliner’s to open up potential new routes that include:
- Brisbane – Chicago
- Brisbane – San Francisco
- Brisbane – Seattle
- Perth – Paris
And by 2022, Joyce has yet again reaffirmed his airline’s commitment to fly direct between Sydney and Europe.
Qantas says a survey of 1,300 people found 80% would try an ultra-long-haul flight and a large proportion of them would pay a premium for such a service. In fact, a majority of people said they would consider buying up to Premium Economy or Business on an ultra-long-haul route.
