“The Resilient Rise: Analyzing Alan Joyce’s Impact on Qantas’ Share Price”

Qantas’ Huge Profit Raises Questions about Profitability in Australia’s Industry Sectors

The recent announcement of Qantas’ record $2.5 billion underlying profit before tax has sparked a debate about the “right” level of profitability in Australia’s concentrated industry sectors. While the size of the profit is impressive, it is important to understand why Qantas has been able to achieve such financial success in the wake of the pandemic.

A Leaner and Meaner Airline

Outgoing CEO Alan Joyce and incoming CEO Vanessa Hudson have positioned Qantas as a different airline than it was before the pandemic. They have implemented a cost-cutting strategy that has resulted in $1 billion of structural costs being eliminated from the company. This leaner and meaner approach has undoubtedly contributed to Qantas’ profitability.

Important Ramifications for Investors and Customers

The cost reset at Qantas will have significant implications for both investors and customers in the next five to 10 years. The company’s operating margins and return on invested capital have risen dramatically, leading to questions about whether Qantas is over-earning. Some investors argue that this could create an opportunity for a new competitor to enter the market, capitalizing on disenchanted customers and higher prices. However, Qantas’ historic dominance of domestic aviation and the failures of previous third airlines make it challenging for new entrants to disrupt the market.

Striking a Balance

Qantas’ leadership team has aimed to strike a balance between shareholders, staff, and customers. The recent profit result was accompanied by a $500 million share buyback, bonuses and share payments for staff, and rewards for customers in the form of bonus frequent flyer points and sale fares. However, the more crucial balance that Joyce and Hudson have tried to achieve is between the present and future of the airline. By slashing costs and improving profitability, Qantas is positioning itself for significant reinvestment in its fleet, lounges, staff training, and technology.

The Risk of Disenchanted Customers

While Qantas’ profitability is good news for investors, the airline needs to address the concerns of its customers. Joyce acknowledged that there is room for improvement in service levels, and the net promoter score of customer satisfaction remains below pre-COVID levels. Customers may also be wary of the cost-cutting measures that have been implemented and wonder if the Qantas they knew before the pandemic will ever return. Reassurance and consistent efforts to improve service will be necessary to win back disenchanted customers.

Editorial: Striking the Balance

The enormous profitability of Qantas raises important questions about the balance between profitability and service in Australia’s industry sectors. While it is essential for companies to generate profits to reward shareholders, provide employment, and invest in growth, there is a risk that excessive focus on profitability can lead to reduced service levels and customer satisfaction. Qantas’ success can be attributed to its cost-cutting measures, which have undoubtedly improved its financial standing. However, it is crucial for the airline to strike a balance between the needs of shareholders, employees, and customers in order to foster long-term success and maintain its market dominance.

Advice: Prioritizing Customer Experience

Qantas must prioritize the customer experience moving forward. While cost-cutting measures have improved the airline’s profitability, they have also raised concerns among customers who may feel the impact of reduced service levels. To address this issue, Qantas should invest in initiatives that improve service quality, enhance on-time performance, and increase customer satisfaction. By focusing on delivering a high-quality experience to customers, Qantas can maintain its market dominance and mitigate the risk of new competitors entering the industry. Striking the right balance between profitability and customer experience will be essential for the long-term success of Qantas.