Q+A: Oil prices, old planes and airfare wars: inside Australia’s airlines
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What is the main topic discussed in this episode?
Welcome to Fear and Greed Q&A, where we ask and answer questions about business, investing, economics, politics and more. I'm Sean Aylmer.
How are rising oil prices impacting airlines globally?
The rise in oil prices has seen airlines right around the world cut flights as they grapple with soaring fuel bills. But at the same time, Qantas and Virgin have stepped up their local competition, launching huge sales on domestic and international flights over the last couple of months.
What recent sales have Qantas and Virgin Australia launched?
And now Qantas has pushed back Project Sunrise, its ambitious plan to fly non-stop from the east coast of Australia to London and New York after a delay in delivery of new aircraft. So what's the outlook for the national carrier and the broader aviation sector?
What are the details of Qantas' Project Sunrise and its significance?
Remember, this is general information only and you should seek advice tailored to your circumstances before making investment decisions. Jacob Kakanas is Managing Director, Equity Research at Jarden. Jacob, welcome back to Fear and Greed Q&A.
What is the current state of the Australian aviation sector?
Thanks, Sean. It's great to be back.
So just broadly, the state of the aviation sector, before we get into Qantas and Virgin, has it been as dire as predictions were two or three months ago? Because there are still sales, there's still ability to find relatively cheap fares for people like me.
Yeah, I'm a little bit of a nerd when it comes to having a look at how the aviation industry is going. It's what I'm paid to do. If I could stratify, we get a lot of high-frequency stuff on the supply side, so we can see a lot of the airlines are reducing their capacity. They're trying to make the most of a higher fuel-cost environment, which generally means for consumers...
How is fleet renewal affecting Qantas' operations?
having to pay more at the ticket price. But what we don't get good visibility on, Sean, is the demand side. And there's rightfully some questions building on that side. As you reference, there have been a lot of sales more recently. We tend to look at Qantas' use of the double status credits promotion, which we know brings a lot of bookings forward. We've had two of those in the last quarter. So whilst we can see that the supply side's being reduced, we're at a delicate balance between how much of that's demand-related versus adjusting to the higher fuel costs that you reference.
Okay, if we get on to Qantas and the announcement this week about Project Sunrise. Originally, I think Alan Joyce talked about that in 2017 or something, rather the original date was 2022. Lots happened, COVID happened. There's been most recently Airbus has talked about supply chain issues. So lots of reasons for it. I suppose what I'm getting to, how important is Project Sunrise to Qantas? How important is it to fly Sydney, Melbourne to New York, London in one go?
Yeah, I think what we've seen since the outbreak of COVID and more recently with the conflict in the Middle East, that desire to do point-to-point travel for Australians, especially with the tyranny of distance that we've got, I'd argue has probably increased. Probably the ability to bypass the Middle Eastern hubs, depending on how long disruption goes in the Middle East, but more importantly, to get to your destination as expected without disruption. So I'd say on the appeal to the consumer, it's definitely gone up. In terms of Qantas, it's probably their main growth avenue. There's a lot going on in fleet renewal at the moment. So the domestic fleet renewal is very much about steadying the base and making sure that they've got the most efficient aircraft operating domestically.
What are the implications of Virgin Australia's listing for the aviation market?
But the big prize and the big growth path for Qantas moving forward outside of just market share gains is Project Sunrise. And you referenced off the top, Sean, that there's been some delays with Project Sunrise. We've gone from originally a December delivery date to in 2027 now looking like it's going to roll into the following April. So whilst in terms of timelines, it's not a big shift, it is important when they can start taking bookings and I guess when consumers get bored on that journey as well.
Alan Joyce, at the end of his tenure, was criticised for not spending enough on new planes, basically not renewing the fleet.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:06–0:13
2
How are rising oil prices impacting airlines globally?
0:13–0:28
3
What recent sales have Qantas and Virgin Australia launched?
0:28–0:44
4
What are the details of Qantas' Project Sunrise and its significance?
0:44–0:57
5
What is the current state of the Australian aviation sector?
0:57–1:38
6
How is fleet renewal affecting Qantas' operations?
1:38–3:16
7
What are the implications of Virgin Australia's listing for the aviation market?
3:16–4:36
8
How do market dynamics influence competition between Qantas and Virgin Australia?
4:36–9:45
Speakers
2 identifiedMore from FEAR & GREED | Business News
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