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Qantas looks to further international improvement in 2019

Qantas anticipates stronger results from its international network over the next fiscal year, when most of the benefits of its Perth-London flights and the focus on Singapore as a major overseas hub start to flow.

The Australian carrier introduced its nonstop Perth-London flights on 28 March using Boeing 787-9s. Contrary to recent reports by The Telegraph, chief executive Alan Joyce says that those flights have been performing strongly.

“The seat factor that we have had on that service since it started in March is at 92% with the premium business class at 94% - amazing performance for a new operation.”

The Perth-London flight originates in Melbourne, and effectively replaced the carrier’s Melbourne-Dubai-London flights that were operated using Airbus A380s.

In March Qantas ended service to Dubai, and since then its Sydney-London services have returned to operating via Singapore. Joyce says that this is expected to have a major impact on its bottom line.

“Just the change to our Singapore hub alone is estimated to improve our profitability by A$18 million ($13.2 million) per annum.”

For the year ended 30 June, Qantas International delivered earnings before interest and tax growth of 6.7% to A$399 million, despite its margins remaining static. Unit revenue grew 2.5%, while seat factor increased 3.2 points to 84.2%.

Joyce was bullish about the carrier’s ability to weather higher fuel prices, pointing to the strong revenue environment, and its hedging strategy. It has hedged around 87% of its fuel requirement for the six months to the end of December 2018.

He also sees some potential upside in key markets where competitors will likely have to adjust their fares upwards to meet the higher fuel costs.

“The US airlines, they are not hedged, they have every incentive to recover it as well. The same is true with a lot of the markets that we are operating on, so that gives us the confidence that our business continues to cope very well even in the current fuel environment.”

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