Category Archives: Jetstar Airways (Australia)

Eastern Australia Airlines to start Jetstar services in New Zealand on December 1, routes announced

Jetstar Airways (Melbourne) has unveiled its new regional network in New Zealand, launching low fares on five routes between Nelson, Napier, New Plymouth, Palmerston North, Auckland and Wellington.

Nelson-Auckland and Napier-Auckland flights will take off on December 1, in time for the busy tourism season in both popular holiday destinations.

New Plymouth-Auckland, Palmerston North-Auckland and Nelson-Wellington flights will follow early next year, with services scheduled to begin on February 1, 2016.

 

Jetstar first announced plans for a regional network in June and has been considering proposals from locations across the country for its initial expansion.

 

 

Jetstar’s regional network will add more than 670,000 new seats a year to the domestic market, a significant increase on the airline’s current domestic jet seat capacity of over 2.6 million seats annually.

First flights each day will take off from regional ports, with crew and aircraft positioned overnight in each of the new destinations. Recruiting has commenced for the 100 new jobs the regional expansion will create, with positions available for pilots, cabin crew, and ground crew.

Jetstar logo (large)

The Jetstar-branded regional services, which will be marketed and managed by Jetstar, will be operated by QantasLink. Under this arrangement, Qantas-owned Eastern Australia Airlines (Sydney), which has operated Bombardier Q300 aircraft in Australia for QantasLink for over 15 years, will manage the aircraft operations.

Eastern Australia logo

Jetstar launched trans-Tasman flights in 2005 and established domestic operations in New Zealand in June 2009. The low cost carrier’s fleet of nine Airbus A320 aircraft operate up to up to 250 domestic and 100 international flights a week. Jetstar has over 400 team members in New Zealand.

Copyright Photo: Rob Finlayson/AirlinersGallery.com. Jetstar-branded, operated by Eastern Australia Airlines, Bombardier DHC-8-315 (Q300) VH-TQM (msn 604) at Brisbane was the first of five Q300s to be repainted.

Jetstar Airways aircraft slide show: AG Airline Slide Show

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Jetstar Airways has the first Bombardier Q300 for regional services in New Zealand painted

Jetstar (New Zealand)-Eastern Australia DHC-8-300 VH-TQM (03)(Nose) TSV (Jetstar)(LRW)

Jetstar Airways (Melbourne) has issued this statement and photos:

Jetstar logo (large)

The first of five Jetstar Bombardier Q300 turbo-prop aircraft to be painted in Jetstar livery rolled out of the paint shop in Townsville this week in preparation for regional services in New Zealand later this year.

The aircraft were formerly used by QANTAS Link and will be the first turbo-props to fly under the Jetstar brand.

In addition to the new livery, the Q300s are being given an interior refresh to match the Jetstar onboard product.

Further details of the new services, including the four regional destinations they’ll be flying to in New Zealand, will be announced in a few weeks.

Regional New Zealand flights on the Q300s will be operated by Eastern Australia Airlines for Jetstar Airways.

Eastern Australia logo

Copyright Photos: Jetstar Airways. Eastern Australia Airlines Bombardier DHC-8-315 (Q300) was rolled out of the paint shop at Townsville in the new look.

Jetstar aircraft slide show: AG Airline Slide Show

Jetstar (New Zealand)-Eastern Australia DHC-8-300 VH-TQM (03)(Grd) TSV (Jetstar)(LRW)

QANTAS Airways goes double daily to Tokyo, Japan

QANTAS Airways (Sydney) added a significant expansion of its presence in Japan with the launch of double daily services between Australia and Tokyo this weekend.

QANTAS flight QF25 departed from Sydney to Tokyo’s Haneda Airport on July 31, followed by the departure of QF61 from Brisbane to Narita Airport yesterday (August 1).

QANTAS’ Brisbane-Narita launch flights will be operated by the airline’s refurbished Airbus A330 aircraft, with lie-flat seats in Business, brand new Economy seats and new inflight entertainment.

The refit of these aircraft, which takes one month each, is being done at QANTAS’ heavy maintenance facility in Brisbane. These aircraft are being introduced progressively onto Asian routes.

To celebrate the launch of the new Japan services, customers onboard flights departing to Narita and Haneda and in Qantas International Lounges in Sydney and Brisbane will be treated to Japanese-inspired menus for the first week of August, including Tuna Tataki Nigiri in Business, and Green Tea flavoured Kit Kats in Premium Economy and Economy.

The launch of double daily QANTAS flights to Tokyo follows Jetstar’s introduction of its Boeing 787 Dreamliner on the Melbourne-Narita route earlier this month, increasing the available seats between the two cities by 20 per cent over the next year. The upgrade from Airbus A330 aircraft to the higher capacity Boeing 787 will be complemented by an increase in flights from four to six per week December to March to meet growing demand for flights between Melbourne and Japan in the peak season.

Copyright Photo: Rob Finlayson/AirlinersGallery.com. QANTAS Airways Airbus A330-303 VH-QPA (msn 553) with a special “80 Years QANTAS International” emblem lands at Brisbane.

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Eastern Australia Airlines to operate Jetstar Airways-branded Bombardier Q300s in New Zealand

Jetstar Airways (Melbourne) has announced plans to start flying to regional destinations in New Zealand starting in December*.

Jetstar logo (large)

The new services will be operated by a fleet of five 50-seat Bombardier DHC-8-300 (Q300) Dash 8 turboprop aircraft and are expected to create at least 100 new jobs for pilots, cabin crew, and ground crew.

The services are expected to operate to at least four regional destinations initially, with some of those under consideration being Hamilton, Rotorua, New Plymouth, Napier and Palmerston North in the North Island and Nelson and Invercargill in the South Island. These will connect with one or more of Jetstar’s current domestic destinations.

Regional fares will go on sale in September with first flights taking off in early December, in time for the busy summer and holiday season.

QANTAS logo (large)

Jetstar Airways, which is fully owned by QANTAS Airways, launched Trans-Tasman flights in 2005 and established domestic operations in New Zealand in June 2009. The low cost carrier’s fleet of nine Airbus A320 aircraft operate up to up to 240 domestic and 100 international flights a week.

Jetstar has crew bases in Auckland and Christchurch and provides employment for over 400 pilots, cabin crew, engineers and ground crew around the country.

QANTAS Link logo

The Jetstar-branded regional services, which will be marketed and managed by Jetstar, will be operated by QANTAS Link. Under this arrangement, QANTAS-owned Eastern Australia Airlines (Sydney), which has operated Q200 and Q300 aircraft in Australia for QANTAS Link for over 15 years, will manage the aircraft operations.

Eastern Australia logo

* Services are subject to regulatory approval.

Copyright Photo: Rob Finlayson/AirlinersGallery.com. Eastern Australia Airlines operates both the pictured Bombardier (de Havilland Canada) DHC-8-200 Dash 8 and the DHC-8-300 (Q300) aircraft types on regional routes in Australia under the QANTAS Link brand. DHC-8-201 VH-TQG (msn 430) waits for the next flight at the gate at Hobart, Tasmania.

Jetstar Airways aircraft slide show: AG Airline Slide Show

Video: QANTAS Link operations.

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Jetstar Airways to add three new routes in March

Jetstar Airways (Australia) (Melbourne) is planning to add three new routes on March 29 per Airline Route: Cairns – Denpasar, Gold Coast – Perth and Melbourne – Wellington.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Airbus A320-232 VH-VQO (msn 2587) taxies at Denpasar.

Jetstar Airways aircraft slide show:

 

QANTAS loses a record $2.6 billion for its fiscal year, outlines its fleet plans

QANTAS Group (Jetstar Airways and QANTAS Airways) (Sydney) is changing its corporate organization in the wake of a large (record) financial loss of A$2.8 billion ($2.6 billion) for its fiscal year. The company hopes to attract new foreign investors with these changes.

The main changes is the creation of a holding company that will manage separate domestic and international divisions.

The company also performed a major write down of the value of its aircraft due to currency fluctuations in the past when the aircraft were purchased.

The company issued this full financial report (all figures are in Australian dollars) and its fleet plans.

QANTAS Group has announced an Underlying Loss Before Tax of $646 million and a Statutory Loss After Tax of $2.8 billion for the 12 months ended 30 June 2014.

The Underlying PBT result was driven by the cumulative impact of two years of industry capacity growth ahead of demand, leading to a $566 million decline in FY14 revenue, and by record Australian dollar fuel costs of $4.5 billion – up $253 million from FY13.

In response, QANTAS is driving an earnings recovery and de-leveraging the Group’s balance sheet to shape a profitable future and build long-term shareholder value.

The $2 billion accelerated QANTAS Transformation program announced in February is permanently reducing costs and laying the foundations for sustainable growth in earnings.

Transformation benefits totalled $440 million in FY14, including $204 million of second-half benefits from the accelerated QANTAS Transformation program.

A further $900 million of accelerated transformation projects are in the implementation phase, with more than $600 million of benefits from these projects to be realised in FY15.

To date, projects equivalent to more than half the $2 billion target have been delivered or are underway.

Unit costs were reduced by 3 per cent over the year, accelerating from a 2 per cent reduction in the first half to a 4 per cent reduction in the second half.

QANTAS CEO Alan Joyce said the underlying result had been foreshadowed at the Group’s half-year announcement in February.

“There is no doubt today’s numbers are confronting, but they represent the year that is past,” Mr Joyce said.

“We have now come through the worst. With our accelerated QANTAS Transformation program we are already emerging as a leaner, more focused and more sustainable QANTAS Group.

“There is a clear and significant easing of both international and domestic capacity growth, which will stabilise the revenue environment.

“We expect a rapid improvement in the Group’s financial performance – and a return to Underlying PBT profit in the first half of FY15, subject to factors outside our control.”

Significant one-off costs associated with QANTAS Transformation are recognized in the statutory result, including restructuring and redundancies ($428 million) and primarily non-cash costs relating to early aircraft retirements ($394 million). Of the 5,000 redundancies announced in February, 2,500 have been implemented as at August 28.

At the same time as delivering cost reduction, the Group has taken action to adjust its capacity and network in response to shifts in demand and the competitive environment – while retaining flexibility to make further adjustments if required.

International competitor capacity growth is expected to be 2.4 per cent in the first half of FY15 and domestic market capacity growth is expected to be around 1 per cent, significantly below recent trends for both markets.

Financial Position

Group liquidity at June 30 was $3.6 billion, comprising $3 billion in cash – up around $600 million from the half-year – and $630 million in undrawn committed facilities. With operating cash flow of $1.1 billion, the Group was net free cash flow neutral in FY14.

The Group significantly extended its debt maturity profile through two landmark bond issuances totalling $700 million, with no major unsecured refinancing required before April 2016. Net debt including operating lease liability was reduced by $96 million.

Overall capital investment has been reduced to maximise net free cash flow for debt reduction, while the Group has maintained targeted investment in fleet, product and service to sustain brand and yield premiums for Qantas and Jetstar.

Capital investment was $874 million in FY14. Planned capital investment in FY15 has been reduced from $800 million to $700 million, with a forecast of $800m in FY16.

The Group’s average fleet age remains at a 20-year low of 7.7 years, with 35 per cent of the fleet debt-free. Thirty-one new debt-free aircraft have been added since FY10, including seven in FY14.

Outcome of Structural Review

QANTAS today also announced the outcomes of the structural review that commenced in December 2013.

The Group has identified, valued and will continue to assess opportunities to sell non-core assets such as airport terminals, property and land holdings. Any proceeds from such sales will be used to repay debt.

After detailed strategic and structural assessment of QANTAS Loyalty, the decision has been made to retain this highly valuable business within the existing Group structure. It was determined that there was insufficient justification for a partial sale. QANTAS Loyalty continues to offer major profitable growth opportunities.

No new Jetstar ventures will be established while the Group is focused on transformation. Substantial value exists across the Jetstar Group airlines, to be realised over time.

Since 2012, QANTAS’ international and domestic airlines have reported their financial performance as separate segments, to strengthen accountability and performance. Following the partial repeal of the QANTAS Sale Act, the Group will establish a new holding structure and corporate entity for QANTAS International. This decision will create the long term option for QANTAS International to attract external investment and participate in partnership opportunities in the international aviation market, with a view to achieving efficiencies and improved returns to shareholders.

Fleet write down

Under accounting standards, the decision to establish a new holding structure and corporate entity for QANTAS International requires a change to QANTAS’ Cash Generating Units (CGUs) for impairment testing. The previous ‘QANTAS Brands’ CGU has been split into four separate CGUs: QANTAS International, QANTAS Domestic, QANTAS Loyalty and QANTAS Freight.

After being tested on a standalone basis for the first time, the QANTAS International CGU requires a write down of $2.6 billion. The size of the write down is largely due to the historic cost of aircraft purchased with an average exchange rate from Australian dollars to U.S. dollars of $0.68.

This writedown is a non-cash charge, recognised in the statutory result, with no cash impact on the Group’s or QANTAS International’s operations. It is a writedown to the carrying value of aircraft that QANTAS has no intention to sell and intends to retain in its fleet.

Following the write down, the carrying value of QANTAS International aircraft will be more reflective of the current market value of the fleet, and future depreciation expense will be approximately $200 million per year lower as a result of this change.

CEO Comment

Mr Joyce said the Group’s priority now was to push forward with the accelerated QANTAS Transformation program after a positive start.

“After an extremely difficult period, we are focused on building momentum with our turnaround in FY15,” Mr Joyce said.

“Our cash balance and liquidity position is strong, and the Group’s overall financial performance is rapidly improving. We are removing costs to drive earnings growth. And the work we’ve done over recent years to renew our fleet and improve service has been recognised with a string of awards and record customer satisfaction.

“In February we made a deliberate choice to continue investing in core initiatives for customers in order to hold our competitive position, keep our brands strong and maintain a yield premium in a challenging market. As we transform our business at pace, our airlines are providing better service than ever.

“The structural decisions we announce today give the Group maximum scope to attract capital in a fiercely competitive international aviation market. Standing still while the world changes around us is not an option.

“With our structural review complete, we can move forward with certainty.”

Breakdown of Results

QANTAS Domestic

QANTAS Domestic reported Underlying EBIT of $30 million, down from $365 million in FY13.

Group Underlying EBIT, including QANTAS Domestic and Jetstar’s domestic operations, was just below $50 million.

The earnings deterioration in FY14 was a result of market capacity increases ahead of demand, weaker demand in the resources and government sectors, price pressure in all industries, unrecovered carbon tax costs and an unfavourable fuel cost of $68 million.

In this volatile market, QANTAS Domestic’s strategy of maintaining a capacity, frequency and product advantage over the competition saw it remain Australia’s premium carrier of choice.

The airline held an 80 per cent share of the domestic corporate travel market by revenue, including 48 new accounts, eight accounts won back from the competition, 10 accounts lost and 182 accounts renewed.

Comparable unit costs were reduced by 3 per cent as QANTAS Transformation benefits began to flow, helping close the cost gap with the competition.

Both customer satisfaction and customer advocacy were at record levels in FY14, helped by QANTAS Domestic’s consistently superior on-time performance.

QANTAS Domestic was Australia’s most punctual major domestic airline every month in FY14 and, as at June 2014, had led the competition for 18 straight months – a key factor in winning and retaining corporate accounts.

QANTAS International

QANTAS International reported an Underlying EBIT loss of $497 million, compared with a loss of $246 million in FY13.

The business delivered another strong year of cost reduction, cutting comparable unit costs by 4 per cent, and has now realised more than $400 million of transformation benefits over the past two financial years. However, these benefits were offset in FY14 by competitor capacity growth of 9.5 per cent – well above demand – and record fuel costs.

Fuel price and foreign exchange movements hit Qantas International hardest of any of the Group’s businesses, with an impact of $142 million.

Between FY09 and FY14, competitor capacity growth in the Australian international market was 44 per cent, compared with global growth of 29 per cent. Importantly for the Group’s outlook, capacity expansion is now slowing, with expectations for competitor growth of 2.4 per cent in the first half of FY15.

By optimizing its network and fleet, including the retirement of older Boeing 747s, QANTAS International is cutting unit costs while improving the travel experience for customers. Retiming the QF9/10 services to Dubai and London, for example, has freed up an A380 to operate on the popular Dallas/Fort Worth route and will lead to a significant increase in asset utilization.

Customer satisfaction reached record levels in FY14 and customer advocacy was a record for the year. New lounges were opened in Singapore, Hong Kong and Los Angeles, while new and expanded codeshare agreements were struck with China Southern, LAN Airlines and Bangkok Airways.

These agreements complement the ground-breaking QANTAS-Emirates partnership launched in FY13. The Dubai route continues to receive the highest customer satisfaction anywhere on the QANTAS International network, with more than 2 million QANTAS customers having already travelled through the hub since the partnership was launched.

QANTAS International now offers its biggest ever global network, with 1,200 destinations available with Qantas and its partner airlines.

Jetstar Group

The Jetstar Group reported an Underlying EBIT loss of $116 million, down from Underlying EBIT of $138 million in FY13.

Controllable unit costs were reduced by 2 per cent. However, these gains were offset by an unfavourable fuel cost of $86 million, a yield decline of $113 million across the highly competitive South East Asian and Australian markets and an increase in associate start-up losses of $20 million. Total associate start-up losses in Asia were $70 million due primarily to the rapid expansion of Jetstar Japan as it consolidates its leading LCC position in the Japanese domestic market.

Jetstar’s domestic business in Australia remained profitable – as it has been every year since launch in 2004 – and continued to play its part in the Group’s successful two-brand strategy.

Customer satisfaction remains at record levels in Jetstar Airways’ domestic and international operations, helped by continued improvement in on-time-performance and the introduction of the Dreamliner on key international routes, including Bali, Phuket and Bangkok.

The Jetstar Group airlines in Asia, in which QANTAS is a minority investor, remain focused on distinct market priorities:

Growth at Jetstar Asia has been suspended in a very challenging Singapore market that saw capacity expand by 23 per cent in FY14, but the business made productivity gains, holds a substantial yield premium to its LCC competitors, and is ranked the nation’s leading LCC. Its performance is expected to improve as capacity growth moderates, with market correction already underway.

Jetstar Japan is Japan’s largest and fastest growing LCC, having carried over 5 million passengers since launch and opened a second domestic base in Osaka. The launch of operations from the second base is improving unit cost performance, as a result of increased asset utilisation from the 24-hour airport in Osaka. With LCCs still holding just 6 per cent of the Japanese domestic market, the business has significant growth potential.

Vietnam’s Jetstar Pacific cut unit costs and increased customer advocacy in a high-growth market. The business has completed its recapitalisation, has begun international services and will expand its fleet from 7 to 10 aircraft by December 2014.

The Board and management of Jetstar Hong Kong continue to work with local regulators towards gaining approval to begin operations.

QANTAS Freight

QANTAS Freight reported Underlying EBIT of $24 million, compared with $36 million in FY13.

Earnings were lower as a result of the sale of Star Track Express in FY13, while global air cargo markets remained challenging. However, the integration of Australian air Express with Qantas Freight is now complete and full run-rate benefits began to flow in the second half of FY14.

Outlook

The Group expects a return to an Underlying Profit Before Tax in the first half of FY15, subject to factors outside its control.

This is based on the following expectations:

A target of $300 million of Qantas Transformation benefits to be realised in the first half.

A stabilising operating environment, as market capacity growth subsides.

First half fuel costs in line with the first half of FY14.

The repeal of the carbon tax.

Reduced depreciation costs compared with the first half of FY14.

Fleet Update:

The QANTAS Group provided an update on its fleet and network strategy for FY15 and beyond.

Since FY09, the Group has taken delivery of more than 140 aircraft and retired or returned leases for 80 aircraft, resulting in an average fleet age of 7.7 years – the youngest for two decades and significantly below the average in North America, Europe and the Asia Pacific.

The Group’s focus now is on maximizing the advantages of this young, competitive fleet, and completing the retirement of older aircraft types.

QANTAS CEO Alan Joyce said the Group’s fleet strategy was based on clear, consistent principles:

Increasing fleet utilization in the international and domestic markets.

Putting the right aircraft on the right route.

Offering the best experience in every market for customers.

Realising the cost benefits of new-generation aircraft.

Fleet and Network Changes

Key fleet and network changes completed or announced during FY14 are as follows:

QANTAS International

A more than 5 per cent increase in asset utilization by QANTAS International, including the retime of Melbourne-Dubai-London services and allocation of an Airbus A380 to the Dallas/Fort Worth route from September 2014.

Gradual replacement of Boeing 747s with A330s on routes to Asia, with all Sydney-Singapore and Brisbane-Singapore services to be operated by A330s by the end of September 2014.

Early retirement of four Boeing 747-400s, as the Group works towards the retirement of all non-reconfigured Boeing 747-400s by early 2016. This will leave nine, newer Boeing 747-400s fitted with A380-standard interiors.

Four Boeing 787-8s delivered to Jetstar, allowing the transfer of three A330-200s from Jetstar to QANTAS Domestic.

QANTAS Domestic

Planning for a reduction in average ‘turn time’ for QANTAS Domestic aircraft to increase utilization, to be implemented during FY15.

The announcement that all the Group’s Boeing 737-800s will be refurbished from mid-2015, expanding total Boeing 737-800 capacity by 3 per cent, along with improvements to inflight entertainment systems.

Retirement of all older Boeing 737-400s (completed in February 2014).

Early retirement of seven Boeing 767-300s, with all aircraft of this type to go by the end of 2014. Current fleet size is 10 aircraft.

More targeted use of QANTAS Domestic’s bigger A330-200s to reflect demand, with a focus on East-West routes to Perth and peak East Coast services.

All of Network Aviation’s seven Brasilia turboprop aircraft have been retired (effective August 2014).

Network aviation now has a single fleet of 12 Fokker F100 jets.

Fleet Renewal and Simplification

In FY14 the Group took delivery of 23 new aircraft, retired 19 older aircraft and returned eight leases.

Under current plans for FY15 the Group will receive 10 new aircraft, retire 18 aircraft and return two leases.

As a result of ongoing fleet retirements and simplification, the Group’s mainline fleet will be reduced from 11 different types in FY13 to seven different types in FY16.

Restructured Order Book

The Group announced in February that more than 50 aircraft on order would be deferred or sold to reflect more efficient fleet utilization and slower capacity growth.

In light of the more subdued domestic capacity outlook and shift to more efficient utilization of narrow-body aircraft:

Two QANTAS Boeing 737-800s, including one sourced from the domestic fleet and one from the trans-Tasman fleet, will be sold during FY15.

A decision has been taken not to renew the leases on two QANTAS Domestic A330-200s, meaning these aircraft will leave the fleet in the first half of FY16.

Five Airbus A320ceos on order for Jetstar Airways have been sold, reflecting the more subdued outlook for domestic capacity in FY15.

Two QANTAS Link Bombardier Q300s will be sold during FY15.

In addition:

Orders for 21 Airbus A320ceos have been deferred by four years and converted to orders for 21 of the more-fuel-efficient A320neos, meaning that the Group has orders for a total of 99 A320neos.

The Group has pushed back the first of its 50 Boeing 787 options and purchase rights from 2016 to 2017, in line with the completion of the accelerated QANTAS Transformation plan.

As previously announced, the Group has deferred the final eight Airbus A380s on order for QANTAS International, with an ongoing review of delivery dates to meet potential future requirements.

As previously announced, the Group has deferred the final three of 14 Boeing 787-8s on order for Jetstar.
The Group retains significant flexibility in arrangements with manufacturers and lessors should the competitive environment or capacity forecasts change substantially.

Copyright Photo: John Adlard/AirlinersGallery.com. QANTAS is now planning for an early retirement of seven Boeing 767-300s. All 767s will be gone by the end of 2014. The current 767-300 fleet size is 10 aircraft. Boeing 767-338 ER VH-OGD (msn 24407) arrives at the Sydney hub.

QANTAS Airways: AG Slide Show

Jetstar Airways (Australia): AG Slide Show

QANTAS Group reports a first half loss, attacks ownership of Virgin Australia, tough decisions ahead to reduce costs

QANTAS Group (Sydney) (QANTAS Airways and Jetstar Airways) today issued its first half financial report:

QANTAS announced an Underlying PBT loss of A$252 million ($225.1 million USD) and a Statutory Loss After Tax of A$235 million ($209.9 million USD) for the six months ending on December 31, 2013.

The underlying result is in line with guidance and reflects fundamental changes in the Australian aviation market, with a significant deterioration in earnings during the half.

Chief Executive Officer Alan Joyce said the result was unacceptable and comprehensive action would be taken in response.

“We are facing some of the toughest conditions QANTAS has ever seen,” Mr Joyce said.

“Australia has been hit by a giant wave of international airline capacity, with a 46 per cent increase in competitor capacity since 2009 – more than double the global increase of 21 per cent over the same period.

“The Australian domestic market has been distorted by current Australian aviation policy, which allows Virgin Australia to be majority-owned by three foreign government-backed airlines and yet retain access to Australian bilateral flying rights.

“Late last year, these three foreign-airline shareholders invested more than $300 million in Virgin Australia at a time when, as Virgin Australia reported to the ASX on February 6, it was losing money. That capital injection has supported continued domestic capacity growth by Virgin Australia despite its growing losses.

“QANTAS has been undertaking its biggest ever transformation over the past four years, cutting comparable unit costs by 19 per cent over four years, but this is not enough for the circumstances we face now.

“With structural economic changes being exacerbated by the uneven playing field in domestic aviation, we must now take actions that are unprecedented in scope and depth.

“We will accelerate our QANTAS Transformation program to achieve $2 billion in cost reductions by FY17. Hard decisions will be necessary to overcome the challenges we face and build a stronger business.”

Summary of Results

QANTAS Domestic

QANTAS Domestic reported Underlying EBIT1 of A$57 million, down from A$218 million in 1H13.

Competitor capacity growth in the domestic market continued to outpace QANTAS Group capacity growth, as it has since FY12. At the same time, demand was lower than market growth, putting pressure on yields and passenger loads.

Overall, the total domestic profit pool has shrunk from more than $700 million in FY12 to less than $100 million in 1H14. During this period the Virgin Australia Group added 4.5 billion Available Seat Kilometers (ASKs), compared to 4.3 billion ASKs added by the QANTAS Group.

A softening resources market, corporate account pricing pressure, and fuel and foreign exchange impacts also affected the QANTAS Domestic result.

Despite the challenging market conditions, QANTAS Domestic continues to deliver outstanding service, earning record customer advocacy. It was the most punctual major domestic airline in 12 out of 12 months during 2013, while its ongoing fleet renewal program helped reduce unit costs and improve the customer experience.

QANTAS Domestic remains the airline of choice for business travellers, holding more than 80 per cent of the corporate market by revenue in the half.

QANTAS International

Qantas International reported an Underlying EBIT loss of A$262 million, compared with a loss of A$91 million in 1H13.

The trend of intense competitor capacity growth in the Australian international market continued in the half. Total international market capacity growth for FY14 is expected to be 9 per cent, well above the global average, resulting in particularly strong yield pressure for QANTAS’ Asian and European markets.

QANTAS International made continued progress in reducing comparable unit costs (by 4 per cent in the half) and maintained record customer advocacy.

However, the lower Australian dollar has meant higher fuel costs, with a significant impact on the long-haul sectors flown by QANTAS International.

Jetstar Airways

The Jetstar Group reported an Underlying EBIT loss of A$16 million, down from an Underlying EBIT profit of A$128 million in 1H13.

Competitive pressure on yields (especially in South East Asia), a A$29 million share of associate losses, and fuel price and foreign exchange impacts were the main factors behind the result. Jetstar’s domestic operations in Australia remained profitable.

The fundamentals of Jetstar’s low-cost carrier model remain strong, with a 2 per cent improvement in unit costs1 and increased ancillary revenue1 during the half, and customer advocacy is at record levels. The introduction of the Boeing 787-8 into Jetstar’s long-haul network is delivering cost and customer service benefits.

QANTAS Loyalty

QANTAS Loyalty reported Underlying EBIT of A$146 million, a record result , up from Underlying EBIT of A$137 million in 1H13. The business continues to perform very strongly, with billings up 9 per cent in the half, three million awards redeemed and record customer advocacy. There are currently 9.8 million QANTAS Frequent Flyer members , with a target of 10 million for the full year.

QANTAS Loyalty’s growth initiatives are exceeding expectations, with a positive customer response to both the new QANTAS Cash member card and the AQUIRE small-to-medium enterprise loyalty platform.

QANTAS Freight

QANTAS Freight reported Underlying EBIT of A$11 million, down from A$22 million in 1H13, in the context of reduced capacity, consolidation and a weak global cargo market.

 Financial Position and Capital Expenditure

QANTAS has strong liquidity of A$3 billion, comprising A$2.4 billion in cash and A$630 million in undrawn debt facilities, as at December 31, 2013. There are no major unsecured debt maturities until April 2015.

Approximately 30 per cent of the QANTAS Group’s passenger fleet is debt-free. The Group has added 31 new unencumbered aircraft since FY10, including seven added in the first half of FY14. Twenty mid-life aircraft become debt-free in FY14. The Group’s average passenger fleet age is 7.6 years, the youngest in two decades.

Capital expenditure in FY14 is weighted to the first half, with $900 million invested in the six months to December 31, 2013 and a further A$300 million planned for the second half.

Following the review launched in December, planned capital investment has been aligned with financial performance, with a total reduction of A$1 billion over FY15 and FY16. Capital expenditure in FY15 and FY16 will be A$800 million in each year, including movements in operating lease liabilities1, while the Group maintains flexibility to make further changes if needed.

Outlook

The Group’s 2H14 operating environment remains very challenging and volatile. Soft underlying domestic demand is continuing in the seasonally weaker half, with domestic and international yields and loads expected to remain depressed.

The Group’s current operating expectations are as follows:

• Group capacity to increase by 3-3.5 per cent in 2H14 compared to 2H13.

• Group domestic capacity to increase by 3-4 per cent in 2H14 compared to 2H13, while maintaining flexibility.

• Underlying fuel costs expected to be approximately A$4.6 billion in FY14.

No Group profit guidance can be provided at this time due to major transformation being undertaken by Qantas, the high degree of volatility and uncertainty in the competitive environment, global economic conditions, fuel prices and foreign exchange rates.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Airbus A380-842 VH-OQK (msn 063) with “The Modern Family Flyer” sub-titles arrives in Los Angeles.

In January 2014 QANTAS issued this announcement:

QANTAS has announced a partnership with Twentieth Century Fox Television and Twentieth Century Fox Consumer Products to bring the top rated American comedy series “Modern Family” to film in Australia.

QANTAS will fly the cast and crew from Los Angeles in February as the Pritchett-Dunphy-Tucker clan takes a vacation down under for an episode to be broadcast later this season. Filming in Australia is expected to take two weeks.

Lauded for revitalizing the television sitcom, “Modern Family” is one of the largest critical and commercial hits of the past decade.  The recipient of four consecutive Emmy Awards for Outstanding Comedy Series and a Golden Globe Award for Best Comedy Television Series, “Modern Family” is both Network Ten and the ABC Television Network’s top-rated comedy series.

The partnership between QANTAS and Twentieth Century Fox Television’s “Modern Family” and Twentieth Century Fox Consumer Products follows the airline’s support in 2013 for a visit by The Ellen DeGeneres Show, which provided a 22 per cent increase in inbound flights to New South Wales alone, as well as overall boost in destination awareness for Australia.

The entire “Modern Family” cast, including, Ed O’Neill (Jay), Julie Bowen (Claire), Ty Burrell (Phil), Sofía Vergara (Gloria), Jesse Tyler Ferguson (Mitchell), Eric Stonestreet (Cameron), Sarah Hyland (Haley), Nolan Gould (Luke), Ariel Winter (Alex), Rico Rodriguez (Manny) and Aubrey Anderson-Emmons (Lily) will join co-creator and executive producer Steven Levitan for the visit to Australia.

“Modern Family” producers will travel to Australia in advance of the shoot in January to scout and identify preferred filming locations and potential storylines.

The series is produced by Twentieth Century Fox Television in association with Picador Productions and Steven Levitan Prods. Steven Levitan and Christopher Lloyd are the creators/executive producers. Danny Zuker, Dan O’Shannon, Bill Wrubel, Paul Corrigan, Brad Walsh, Abraham Higginbotham, Jeffrey Richman and Jeff Morton also serve as executive producers.

QANTAS Airways: AG Slide Show

Jetstar Airways: AG Slide Show