Qantas, Air New Zealand Benefit From Foreign Airlines Operation Constraints

The projections of Qantas and Air New Zealand are optimistic for at least the next 12 months. Executives from both airlines expect a healthy revenue environment as tourists return to countries in the southern hemisphere, citing lower international flight capacity into Australia and New Zealand.

Throughout its fiscal year 2025, which ends in June 2025, Qantas, the larger of the two airlines, anticipates industry capacity in Australia to lag behind 2019 levels. In a meeting with analysts last week, Qantas Group CEO Alan Joyce increased demand for overseas travel would lead to higher unit revenues (higher tickets). Joyce is “extremely optimistic” that Qantas’ international operations would return to profitability by the end of the current fiscal year in June 2023.

Qantas predicts worldwide industrial capacity will not return to pre-pandemic levels until 2025. By this time, Australia would have “had five years of growth in the economy since [2019], so that’s still undeserving the market,” Joyce said. Unit sales are strong because “there is much more demand than supply.”

The situation is similar from Air New Zealand’s perspective, with high international demand and limited capacity, but they are less enthusiastic about its longevity. Based on internal predictions, Air New Zealand’s CFO Richard Thomson stated last Thursday that the company expects international industry capacity in New Zealand to remain constrained and below demand through at least the end of its current fiscal year, which also ends in June 2023.

Compared to other markets across the world, “there is comparatively sort of little operators — other airline operators entering the New Zealand market,” Thomson added. Therefore, “the yield environment has been rather favourable.”

To what end are timetables limited to Australia and New Zealand? Aircraft supplies stated top officials from both companies.

New plane deliveries from Airbus and Boeing have been delayed due to problems in the supply chain. New Airbus A320neo family plane deliveries are affected, as are Boeing 787 widebodies, and the latter has a disproportionate impact on Qantas and Air New Zealand. Boeing was forced to suspend deliveries of new 787s for more than a year by the Federal Aviation Administration (FAA) of the United States because of production quality difficulties. The delivery of a brand new 787-8 to American Airlines marked the restart of deliveries earlier in August.

Qantas has placed solid orders with Boeing for three 787-9s, but the airline does not anticipate delivery of the planes until the second quarter of 2023, according to Joyce. The airline’s ability to compensate for lost capacity when it decommissioned its Boeing 747s during the crisis has been hampered. Qantas’ Airbus A380s take a while to return to service because of the extensive maintenance and overhaul that each plane requires.

Due to aircraft limits and blocked markets, particularly in China, Qantas expects to regain just 75% of its pre-pandemic international capacity during the 2023 fiscal year and 100% in 2024. In contrast, domestic Australian capacity in 2023 will be 101 percent of 2019. The 2024 capacity outlook is lifted by Qantas’ plans for a new thrice-weekly nonstop service between Auckland and New York JFK that will begin next June.

Eight Boeing 787-10s have been ordered by Air New Zealand, although they won’t arrive until the fiscal year ends in June 2025. According to Thomson, the airline’s “current perspective of possible delivery dates” after conversations with Boeing puts the delay at one year. With the proposed MTOW increase, the 787s can fly nonstop between Auckland and Los Angeles with a full load and no weight restrictions.

During the fiscal year ending in June, Air New Zealand expects to operate between 75% and 80% of its pre-Covid system capacity. Long-haul international capacity will be roughly 65-70 percent of where it was three years ago, while domestic capacity will approach 2019 levels. Air New Zealand will offer new flights between Auckland and New York starting on 17 September.

Many Asian airlines still can’t reach Australia and New Zealand due to Covid travel restrictions. Cathay Pacific Airways and other mainland Chinese airlines are now scarcely airborne. In 2019, Singapore Airlines carried more international passengers to Australia than any other airline. However, the company currently operates at only 75% of its pre-crisis seat capacity.

Qantas and Air New Zealand are so confident about the future that it’s easy to forget they both lost money in the fiscal year that ended in June. After reporting a profit of $281 million in earnings before interest, taxes, depreciation, and amortisation (EBITDA), Qantas disclosed an underlying loss before taxes of $1.86 billion for the quarter. Total revenues of A$9.1 billion were down 49 percent from the prior three years. Over the same period, unit sales increased by 7%, but unit costs increased by nearly 44% (excluding fuel and depreciation).

According to the airline’s financial statements for the fiscal year ending 31 March 2022, Air New Zealand lost NZ$810 million before taxes. Compared to the previous three-year period, annual sales dropped 53%, to NZ$2.7 billion. Nearly 29 percent more money was made per unit, whereas expenditures rose by 31 percent when fuel was excluded.