Qantas unveiled on Thursday a first-half net profit that slumped 72% from the previous year, triggering an 8 percent slide in its stock price.
In comments to the media, Chief Executive Alan Joyce defended the results, saying the carrier has done better than most of its rivals.
He is right, in most parts, as Qantas remains among the world's most agile airline brands, thanks to a number of factors.
Although Qantas' revenues for the period dipped by 13.4%, costs were slashed by 16.2%, showing Qantas' diligence and discipline in reducing expenditure in the past year. The cutting of flight frequencies to unpopular routes and grounding of older aircrafts were key to these cost savings.
Load-factors have been the highest in five years - at 82.4%, on flights that carried a lesser number of total passengers as compared to the past year.
This simply means that flights were more full than in the past, despite the recession. Of course, the downside was that this was achieved by offering very low fares on certain routes, which are unsustainable in the long run. Joyce eluded to this fact as well, by indicating that the industry's survival depends on higher fares.
Agility in Re-Configuring the Cabin
Qantas was one of the first airlines to add a Premium Economy cabin to their flights. Now, they're standing by their decision by overhauling their cabins. Qantas will be removing First Class on most of its long-haul routes, with the exception of London and Los Angeles, and adding Premium Economy to their widebody jets.
This not only reflects the growing sentiment that premium demand will change in the coming years, but also the fact that there are more first-class seats in the market than required. For example, from Sydney to London, a passenger has the choice to fly on First Class Suites on board a slew of airlines including Singapore Airlines, Emirates, Etihad, Qatar Airways and Qantas.
Qantas is one of the first airlines in the world to remove the First Class in a systematic fashion, and change their long-haul plane configuration to Business, Premium Economy and Economy classes. This effectively increases the number of seats and hence reduces the cost per seat even further. Such agility will pay off for Qantas in the long term.
Leveraging on Jetstar
It's a known fact that the two brand strategy, growing Jetstar aggressively, gives Qantas a very valuable option that few others can match. Jetstar's profits tripled in the past year and continue to provide Qantas a very valuable asset to leverage on low-yielding routes. The two-brand strategy has also ensured that the Qantas doesn't lag behind competition from budget carriers like Virgin Blue and Tiger Airways.
Moreover, the recent Jetstar-AirAsia cost alliance should also help the airlines reap additional benefits in the near future through by tapping on each other's scale and synergies.
In conclusion, even though profits have dipped, it is Qantas' quick-thinking that will keep the firm agile and ahead of most competition in the days ahead.
The youngest winner of Global Brand Leadership Award, Shashank Nigam is the CEO of SimpliFlying.com, an award winning blog on airline branding. He tweets at @simpliflying and helps airlines, airports drive revenue and loyalty through social media conversations.