Australia's biggest airline Qantas Airways said today it will spend more than previously planned to improve "customer pain points" but warned spiralling fuel costs may force it to raise fares from already-elevated levels.
The update sent its shares down as much as 2.5% to a one-year low as investors questioned the airline's ability to grow profit given persistently high costs.
The company, under a new CEO, is trying to navigate a path between reassuring customers it is taking seriously complaints of widespread service problems while telling investors it can contain a surge in costs linked to tight oil supply.
The airline that sells three in five Australian domestic fares has seen its reputation tumble in its home market as its handling of the post-Covid travel revival brought a wave of flight cancellations and reports of lost luggage.
Adding to its woes, last month the competiton regulator sued Qantas accusing it of selling fares on thousands of already-cancelled flights in 2022.
Qantas also lost a union lawsuit when the High Court found its 2020 sacking of thousands of groundstaff was illegal.
The so-called "flying kangaroo" said it would now spend A$80m on "customer improvements" on top of the A$150m previously flagged.
"This additional investment is aimed at addressing a number of customer 'pain points' through improvements such as better contact centre resourcing and training ... more generous recovery support when operational issues arise, a review of longstanding policies for fairness and improvements to the quality of inflight catering," it said today.
At the same time, it said its forecast half-year fuel bill would jump by A$200mto A$2.8 billion if the 30% jump in fuel prices it had faced since May persisted.
"The group will continue to absorb these higher costs, but will monitor fuel prices in the weeks ahead and, if current levels are sustained, will look to adjust its settings," Qantas said.
"Any changes would look to balance the recovery of higher costs with the importance of affordable travel in an environment where fares are already elevated."
RBC Capital Markets analyst Owen Birrell said the company would likely absorb the higher fuel costs "until its target margins come under pressure and then would seek to claw back those costs through capacity cuts and higher fares.
"We don't believe a material earnings shift is feasible from here given rising competition, growing consumer/business cost pressures and incoming re-investment in the product/platform," he said in a client note.
Last week the airline also revealed that its former CEO Alan Joyce received a pay increase of 872% as he collected years' worth of long-term incentives on the way out.
But the airline added that it was cutting and withholding hefty bonuses amid damaging lawsuits.
Irishman Alan Joyce, who retired early this month after a regulator lawsuit accused Qantas of selling tickets on thousands of already-cancelled flights, took home A$21.4m in the 2023 financial year, according to the company's annual report, published today.
Most of the amount was share-based incentives that Joyce was allowed to cash in after they vested, according to the report.
Joyce's total pay for the previous year was A$2.3m.
