Home' Australian Aviation Magazine : October 2009 Contents 27
OCTOBER 2009 AUSTRALIAN AVIATION
“ W hile airlines have been variously
impacted by the global economic crisis, our
approach was to respond swiftly and defini-
tively to softening domestic demand,” said
CEO Brett Godf rey. This primarily saw
a move of capacity from domestic opera-
tions onto the Tasman and into Indonesia
through its Pacific Blue subsidiary.
Those moves to redeploy capacity saw
Virgin Blue’s domestic operations make an
underlying EBIT of $57 million. Some-
what surprisingly, despite the 14.1 per cent
increase in capacity, yield was down by only
2.4 per cent, which the company attributed
to the ‘flight to value ’ as business travellers
sought out lower airfares.
For its part, V Australia recorded an
underlying EBIT loss after foreign ex-
change and startup costs of $124 million
on revenue of $69 million. L oad factor was
satisfactory at 62.3 per cent.
Across the Tasman, Air New Z ealand
performed impressively, recording normal-
ised net earnings of NZ$118m (A$95.4m),
which was 19 per cent lower than the pre-
vious year. “ The result positions Air New
Zealand as one of the top airline perform-
ers globally but it falls short of delivering
shareholders an appropriate commercial
return,” said chairman John Palmer.
While overall passenger numbers at the
Kiwi carrier were down 6.2 per cent, yield
increased by 6.2 per cent to 13.8c/RPK as
the carrier cut capacity by 7.2 per cent to
counteract the fall in passenger demand.
Interestingly, despite Virgin Blue shifting
more capacity onto trans-Tasman flying
through its Pacific Blue subsidiary, Air NZ
managed to increase its short haul yields
by 0.5 per cent. Revenue was down only
slightly to NZ$4.6 billion.
While the profit figures were lower, the
local carriers’ performances were standouts
against the global tide of red ink which has
hit the industry. IATA is holding to its pre-
diction of a global industry loss of US$9bn
(A$10.4bn) this year, driven primarily by
carriers in the Asia Pacific region.
For all three carriers, capacity reductions
appear to have been the saving grace, with
all three announcing cuts, with Qantas
cutting international routes by five per cent,
with Virgin Blue ’s cuts more focused on
the domestic market, while Air Ne w Zea-
land has trimmed trans-Tasman capacity
and made a number of tactical changes to
its long haul ser vices.
Similarly, all three carriers took a number
of measures to reduce their costs, including
making staff redundancies, offering unpaid
leave or moving to further part-time work.
While V irgin Blue and Qantas have cut
capacity – largely by reducing frequencies
on some routes – the Australian domestic
market has once again shown its ability to
hedge the airlines f rom the poor interna-
Overall, data f rom the Bureau of Inf ra-
structure, Transport and Regional Econom-
ics over the past financial year shows that
domestic traffic still managed to record an
increase of two per cent over the previous
However, that increase in traffic ap-
pears to have been driven by the low cost
carriers as passengers of all demographics
have sought out value during the uncertain
economic down times rather than the perks
of business class.
As such, it came as little surprise that
Joyce used the occasion of the results press
conference to also announce that Jetstar
would start flights between Sydney and
Melbourne ’s Tullamarine Airport four
times a day (see p.21). Although primarily
aimed at competing with Tiger Airways’s
up to nine ser vices per day on the route, the
move is also aimed at helping to stem the
loss of patronage f rom Qantas travellers.
Effectively, with Jetstar ’s existing Sydney-
Brisbane ser vices, come October 25 Qantas
and Jetstar will be flying side-by-side on
two sides of the ‘golden triangle ’. Poten-
tially, this could signal a shift within the
Qantas Group away from keeping the
brands flying on different routes to using
both to tackle different consumer segments.
Despite the current gravitation towards
low cost carriers, Joyce also showed that
there is still life in the full ser vice model
domestically, and that Qantas will put its
The Australian domestic market has once again
shown its ability to hedge the airlines from the
poor international conditions.
IN The hOT SeAT Alan Joyce addresses media at his first Qantas annual results press conference as CEO.
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