Qantas Sees Pent-Up Demand Driving at Least 2 Years of Strong Long-Haul Business
Qantas Airways forecasts robust international traffic through 2023 amid strong demand for the long-haul flights it resumed flying in November.
The Sydney-based carrier expects at least two years of pent-up demand as it ramps up its long-haul flying, Qantas CEO Alan Joyce said at the CAPA Australia Pacific Aviation Summit on Tuesday. That demand is selling out many of the flights that it has resumed or set dates to resume. These include London, Los Angeles, and Singapore in November; Honolulu and Vancouver in December; and Bangkok, Johannesburg, and Tokyo in January, according to Cirium schedules. The airline also is seeing strong demand for its new service to Delhi that began on December 6.
The anticipation of a two-year surge in international travel follows a nearly comparable amount of time when Australia’s borders were essentially closed to keep out Covid-19. However, once the country passed an 80 percent national vaccination rate — the rate stood at 88 percent on December 6 — it has eased border restrictions and allowed international flights to resume. This has been a boon to Qantas, which saw international bookings surpass domestic bookings for roughly four weeks when the reopening was first announced.
To put that in perspective, Australia’s domestic network came close to fully recovering earlier this year before a last set of lockdowns prior to hitting the 80% vaccinated threshold. And Qantas plans to fly 2019 capacity levels in January, and it expects to expand to 115 percent of three years earlier by April. Its group subsidiary Jetstar, plans to fly 120 percent of 2019 capacity in April. Internationally, however, Qantas may not fully recover capacity for several years owing to the slower re-openings of some East Asian markets, particularly China.
Qantas is not alone anticipating a surge in pent up international demand. Prior to the emergence of the Omicron variant, United Airlines executives have expected one of the airline’s best years ever on the transatlantic in summer 2022. And, in October, Emirates President Tim Clark forecast a full business travel recovery for his airline, which relies almost entirely on international traffic, in 2022.
Joyce did not comment on the Omicron variant and whether it could slow Qantas’ recovery.
“We want to get people flying again,” said Joyce of Qantas’ strategy in 2022. The airline will focus on flying its aircraft anywhere it can generate cash — not necessarily a profit — in order to get all of its planes back in the air, and staff working again. This will do two things: Generate cash to begin paying down its pandemic debt, and allow Qantas to capture a larger share of domestic marketshare from competitors.
Joyce, echoing earlier outlooks from financial analysts, said he anticipates Qantas and Jetstar will emerge from the Covid-19 crisis with roughly 70 percent market share of the Australian domestic market. That’s a 10 point jump from where it stood prior to the pandemic.
Qantas and Jetstar’s growth comes after the restructuring of Virgin Australia, and closure of Tigerair Australia in 2020. Asked about Rex Airlines and startup Bonza, Joyce said he believes the former competes with Virgin rather than Qantas, and he said Jetstar has a strong franchise to compete with the latter.
Qantas is on schedule to unveil a preferred supplier — Airbus, Boeing, or Embraer — for its more than 100 narrowbody aircraft campaign by the end of the year, said Joyce. Calling the process very “competitive,” he reiterated that the airline was likely to select some combination of the A220, A320neo, 737 Max, and E-Jet-E2 families to replace its 95 Boeing 717s and 737-800s.
The order is part of Qantas’ commitment to achieve net zero carbon emissions by the middle of the century. In addition to more efficient aircraft, the airline will unveil a significant offtake agreement for sustainable aviation fuel (SAF) before Christmas, and continue its carbon offset program, said Joyce.
“We have to be careful to not throw the baby out with the bath water. Aviation has huge economic benefits,” said Joyce when pushed on whether Qantas’ mid-century target is fast enough to address climate change. He noted that batteries lack the energy density necessary to power larger aircraft, and hydrogen-powered engines remain at least a decade away. However, if either of those technologies “came around,” Qantas would be interested in adopting them.Subscribe Now to Airline Weekly