Qantas $80 Million Investment in Redemption Strategy. In a significant move following Vanessa Hudson’s appointment as CEO, Qantas has unveiled a well-structured plan to regain public trust and redeem its image. In this article, we will delve into the details of this plan, highlighting key aspects of Qantas’ investment and strategic direction.

Investment in Customer Service Improvements

The cornerstone of Qantas’ redemption strategy involves an investment of AU$80 million ($53 million) in customer service enhancements. This investment is slated for implementation throughout the financial year ending June 30th, 2024 (FY24). Interestingly, this allocation is in addition to the previously budgeted AU$150 million ($99 million). The financing for these improvements will be sourced from the substantial FY23 profits, a somewhat ironic twist considering these profits were earned amid negative publicity that eroded customer confidence.

Addressing Customer Pain Points

Qantas Group, encompassing subsidiaries Jetstar and QantasLink, is committed to eliminating various customer pain points. The strategy includes ramping up resources and training at its call centers, providing more robust support for operational issues, reviewing long-standing policies for fairness, enhancing in-flight catering quality, and increasing seat redemption options through Frequent Flyer points.

Strong Travel Demand and Capacity Expansion

Despite recent challenges, Qantas asserts that travel demand remains robust. The first quarter of FY24 has seen trading conditions similar to the previous quarter of FY23 (April-June). In anticipation of high demand, Qantas and Jetstar plan to accommodate over 4 million passengers during the September/October school holiday period through nearly 35,000 domestic flights. This marks a significant increase compared to last year’s figures, which stood at 3.7 million passengers and 28,000 flights.

A recent public survey revealed that Australians are prioritizing travel over other discretionary spending in the next six months. With international fares remaining high, there is speculation that increasing capacity, like the addition of extra Qatar Airways flights, could potentially lower prices. In response to this, Qantas intends to boost its international capacity by 12 percentage points by the end of 2023, incorporating an additional 50 weekly flights on both Qantas and Jetstar international services.

To facilitate this expansion, Qantas will utilize a combination of new aircraft arrivals and wet leasing arrangements, including an existing deal with Finnair. Moreover, Qantas will resume services between Sydney and Shanghai and introduce new routes connecting Brisbane with Wellington (New Zealand) and Honiara (Solomon Islands). Additionally, Jetstar plans to launch a new service from Brisbane to Tokyo.

Impact of Fuel Price Escalation

Qantas Group highlights a significant challenge in the form of escalating fuel prices, which have surged by approximately 30% since May 2023, including a 10% increase since August. This surge is attributed to a combination of higher oil prices, increased refiner margins, and a weaker Australian dollar.

Qantas predicts that the Group’s fuel expenses for the first half of 2024 (1H24) will rise by approximately AU$200 million ($132 million) to AU$2.8 billion ($1.85 billion) after hedging. Additionally, there will be an extra AU$50 million ($33 million) impact due to other exchange rate fluctuations.

In response to these challenges, Qantas states that it will absorb these higher costs while closely monitoring fuel prices in the coming weeks. Should the current price levels persist, the company is open to adjusting its settings. Such adjustments would aim to strike a balance between recovering increased costs and ensuring affordable travel, particularly in an environment where fares are already elevated.

A Rational and Coherent Redemption Plan

After a period of negative publicity, Qantas’ comprehensive redemption plan is a welcome development. It demonstrates a clear commitment to addressing customer concerns and seizing opportunities for growth in a challenging market. This strategic move could potentially mark the beginning of a new era for Qantas, with the hope that more such initiatives will follow to further enhance its customer service and operational performance.