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Qantas to cull premium seats as demand dives | ASX: QAN
Qantas Airways, the Australian carrier that invented business class 30 years ago, may remove some premium seats as cost-cutting companies force executives to fly coach or stay at home.
''Ideally, in the current environment, we wouldn't have as many premium seats as we have,'' Chief Executive Officer Alan Joyce said in an interview. The carrier is undertaking a fleet-wide review before deciding which planes it should reconfigure with more economy class seats, he added.
The carrier's premium-class sales have plunged about 30% due to the global recession that has also forced Singapore Airlines and Cathay Pacific Airways to pare flying. As much as 40% of the space on some Qantas Boeing 747s is used for business and first-class seats.
''People have just started flying economy rather than business,'' said Saxon Nicholls, who manages more than $500 million at Herschel Asset Management, including Qantas stock. ''When you get a behavioral change like that you have to adapt.''
Domestic routes
Qantas, which says it started business-class travel in 1979, is shielded from the worst effects of the global travel slump by its dominance on internal Australian routes. The carrier has about two-thirds of its domestic market, the best position for any carrier, according to Peter Harbison, executive chairman of the Centre for Asia Pacific Aviation, an industry consulting company.
Still, Qantas is going to have to ''drastically review'' its operations if the global slump continues for another six months, Harbison said. ''It cannot continue with the same structure and neither can any airline.''
Qantas, which expects a record loss in the six months ended June 30, also faces pressure on routes to North America, once its most profitable market, as Delta Air Lines Inc. and Virgin Blue Holdings add flights.
Qantas used to get as much as 15% of earnings from transpacific routes as it shared a duopoly with UAL Corp.'s United Airlines.
''We think every carrier on that route will be losing money,'' said Joyce, 42. ''We are seeing 35% additional capacity being added in the next year in a market that is declining 10%.''
Job cuts
The carrier, founded in the Queensland outback in 1920, may also face a drop in demand following an outbreak of swine flu in Mexico. The Obama administration has declared a public health emergency in response to the outbreak. An epidemic of severe acute respiratory virus, or SARS, six years ago, led to a plunge in international travel.
Joyce has already fired 5% of Qantas staff and curbed flying to pare loses since becoming CEO in November. Whether the carrier reconfigures planes will depend on how long it will take for the work to pay off through higher sales of economy tickets, he said.
The airline has annual revenue of about $10.6 billion compared with $10.7 billion for Singapore Airlines.
Qantas to cull premium seats as demand dives | ASX: QAN
Qantas Airways, the Australian carrier that invented business class 30 years ago, may remove some premium seats as cost-cutting companies force executives to fly coach or stay at home.
''Ideally, in the current environment, we wouldn't have as many premium seats as we have,'' Chief Executive Officer Alan Joyce said in an interview. The carrier is undertaking a fleet-wide review before deciding which planes it should reconfigure with more economy class seats, he added.
The carrier's premium-class sales have plunged about 30% due to the global recession that has also forced Singapore Airlines and Cathay Pacific Airways to pare flying. As much as 40% of the space on some Qantas Boeing 747s is used for business and first-class seats.
''People have just started flying economy rather than business,'' said Saxon Nicholls, who manages more than $500 million at Herschel Asset Management, including Qantas stock. ''When you get a behavioral change like that you have to adapt.''
Domestic routes
Qantas, which says it started business-class travel in 1979, is shielded from the worst effects of the global travel slump by its dominance on internal Australian routes. The carrier has about two-thirds of its domestic market, the best position for any carrier, according to Peter Harbison, executive chairman of the Centre for Asia Pacific Aviation, an industry consulting company.
Still, Qantas is going to have to ''drastically review'' its operations if the global slump continues for another six months, Harbison said. ''It cannot continue with the same structure and neither can any airline.''
Qantas, which expects a record loss in the six months ended June 30, also faces pressure on routes to North America, once its most profitable market, as Delta Air Lines Inc. and Virgin Blue Holdings add flights.
Qantas used to get as much as 15% of earnings from transpacific routes as it shared a duopoly with UAL Corp.'s United Airlines.
''We think every carrier on that route will be losing money,'' said Joyce, 42. ''We are seeing 35% additional capacity being added in the next year in a market that is declining 10%.''
Job cuts
The carrier, founded in the Queensland outback in 1920, may also face a drop in demand following an outbreak of swine flu in Mexico. The Obama administration has declared a public health emergency in response to the outbreak. An epidemic of severe acute respiratory virus, or SARS, six years ago, led to a plunge in international travel.
Joyce has already fired 5% of Qantas staff and curbed flying to pare loses since becoming CEO in November. Whether the carrier reconfigures planes will depend on how long it will take for the work to pay off through higher sales of economy tickets, he said.
The airline has annual revenue of about $10.6 billion compared with $10.7 billion for Singapore Airlines.
