March 26, 2025 • 22 mins
Qantas CEO Vanessa Hudson has turned around the airline’s post-pandemic performance in her 18 months at the helm.
This week, host Rebecca Jones asks Bloomberg News transport reporter Angus Whitley about what the changes mean for passengers and shareholders, and what’s still in store from Hudson.
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Speaker 1 (00:02):
Quante.
Speaker 2 (00:02):
Quantus is in damage control, facing a class action lawsuit.
Speaker 1 (00:05):
Customers have complained to poor service.
Speaker 2 (00:07):
In the wake of multiple scandals, cancelations, delays, lost bags.
Quantas became one of the biggest stories in corporate Australia
after the pandemic, and for all the wrong reasons. Now
a new boss seems to be winning over a lot
of those angry Aussie flyers. So how is she doing it? Hello,
(00:29):
I'm Rebecca Jones. Welcome to the Bloomberg Australia Podcast. Finally
things seem to be going right at Quantus and may
have taken four years, but our national carrier's share price
is now well above where it was before the pandemic.
But how much higher can the Flying Kangaroo leap? To
help answer that and more, Sydney based transport reporter Angus
(00:50):
Whitley is joining me today in our Melbourne studio Angers.
How was your flight?
Speaker 1 (00:56):
Yeah, Highbeck, it was. Unsurprisingly, it was full. It was
a Jet Star flight and true to form, there were
no spare seats on Jet style, which tells a story
in itself, doesn't it. When you look at Quantus's recent results.
Speaker 2 (01:09):
And you've recently returned home from a much longer flight
to Hong Kong where you had the opportunity to interview,
want to CEO Vanessa Hudson. How was that?
Speaker 1 (01:18):
That was a great opportunity because Vanessa Hudson doesn't do
a lot of media, and I don't think she has
done any international media, if you can call us that.
So it was really a great opportunity to sit down
with her talk about, you know, how she has done
what she's clearly done in the last eighteen months since
(01:39):
she took over, and also, you know how sustainable is
it from here? Can she keep doing what she's clearly done?
And what levers does she have left to pool having
really done, you know, a repair job if you like.
So far, given what Quantus was looking like when she took.
Speaker 2 (01:59):
Over exactly, well, why don't we start at the beginning?
What state was Quantus in when Hudson took over from
Ellen Joyce some eighteen months ago.
Speaker 1 (02:09):
Yeah, I think it's difficult to overstate the problems she
inherited from Quantus if you look back to those days
in twenty twenty three, pretty much since aviation opened up
again after the pandemic, Quantus had struggled to really cope
with the overwhelming reband in demand. So it was an
(02:31):
era you're remember, an era of high consolations of a
spike and lost bags. It was delays that they couldn't
get enough really people to staff the demand to meet
the demand, and Alan Joyce even became a kind of
byword for a trip that had gone awry. You'd been joiced.
(02:54):
If your flight was delayed or canceled, you'd been joiced.
And it really became a pylon. And then I think
I think probably the straw that broke the camel's back that
year was the age of WILLC, the competition regulator, suing
Quantus for allegedly selling tickets on flights that had already
been canceled. It became known as the ghost flights, if
you like, so that they were financially benefiting from flights
(03:17):
that were never going to take off. And as as
really the revulsion at that, I think it's probably not
overstating that the revulsion of those kind of claims simmered
over joy stepped down two months early, and so then
we had the introduction of Vanessa Hudson in September twenty
twenty three, with all these things to do on her
list isn't it. You've just tripped a memory for me.
Speaker 2 (03:38):
I remember flying for work when we reopened and having
to wait such a long time for my bags at
the carousel was one of the contributing factors to me.
Now only flying carry on, just that really long wait
at the end of a very long flight. Yeah, it
certainly does leave an impression on fire. Let's just say that.
(04:01):
Let's have a look at the recent success of Quantus Angus.
What specific changes has Vanessa Hudson made since she's taken
the reins.
Speaker 1 (04:10):
Well, there are cultural changes she's introduced, and there are
material changes, and there are resolutions to kind of long
running sores that had been weeping at Quantus. So first
of all, she apologized several times. So she spent the
first few weeks just apologizing in public, to staff, to shareholders,
(04:32):
to parliamentarians. And then the little things she did to
sort of refocus Quantisan on the things that probably had
been neglected. Was, for instance, Alan Joyce's internal communications at
the top was a share price, which is a taling
statistic to focus on, given that he was accused really
of focusing too much on investors. So that was his
(04:53):
metric that he communicated to stuff. Under Vanessa Hudson, she
peeled that back off and she put a metric called
on time performance at the top of her communications to stuff,
which is basically a gauge of reliability and punctuality. One
of the other really interesting things I think about Hudson
is her leadership style, and we talked a little about
(05:13):
this in the interview in Hong Kong and what kind
of leader are you? And she's really a different kind
of airline leader. The typical aviation CEO as we've seen
in the past ten years, is sort of bombastic, male
of a male outspoken, not dissimilar to Joyce that the
more similar kind of characters we've seen in global aviation
(05:35):
become the face of the airline and almost the airline spokesman.
High profile. Hudson is not that she is a low profile,
and she said to us she listens far more than
she speaks. So this all tells a story of rebalancing
Quantus away from investors and back towards passengers. If you
(05:57):
like swinging that pendulum back. She tries a line and
as one analyst told me, it's a delicate needle to thread.
Speaker 2 (06:05):
Quantas also has a huge amount of retail investors right,
so a lot of those investors are also passengers. He
does sound like it's all in the messaging. She was
also on Bloomberg TV this week as well, speaking to
us to Lose in France. Let's take a quick listen
to what she said about the demand for travel now
(06:26):
and how that's helping the airline turn around.
Speaker 3 (06:29):
We're seeing demand remain strong, strong domestically for both low
cost and premium, but also strong outbound as well. So
we're feeling really optimistic about the next six months and beyond.
And the appetite that Australians have for travel has remained strong,
and we've seen that now for a number of years.
Speaker 2 (06:46):
So Anger's shareholders seem to like what Vanessa Hudson has
been doing. The share price is up more than seventy
percent in the last twelve months, making it the second
best performer on the Bloomberg World Airlines Index. Telling you
about their outlook for Quantus's share price going forward.
Speaker 1 (07:06):
I think this is one of the great ironies of
Hudson's tenure is that she was brought on essentially to
sort of balance the equation a bit more away from
investors and they've ended up having an astonishing twelve months
of returns, So you set up more than seventy percent,
and if you look at the forecasts, there's more to come.
If you look at the market, the twelve month target
(07:27):
price among all the analysts that Bloomberg tracks is ten
dollars eleven. So look at the closing price as we
speak nine to thirty five. That the last closing price,
this forecast to get to ten eleven in the next
twelve months. And if you look at the most optimistic
broker in the market, which is Goldman Sachs, you know,
shouldn't know what they're talking about, shouldn't they gold eleven
(07:48):
dollars eighty. So there's there's more to come in terms
of investor returns. And then just beyond the naked share price,
Hudson has also reinstated the dividend. That's the first time
Quantus has paid a normal dividend since before the pandemic,
and there's a lot of focus on the sustainability of
that divinend. If you look at the kind of the
(08:09):
questions an lysts have asked Vanessa Hudson want to know,
is this a sustainable base from which to assume that
dividends will be paid, and I think the answer is yes,
as long as Quantus keeps generating the cash, it's in
a position now to pay dividends. And that's what striving
some of the share prices.
Speaker 2 (08:27):
Well, and that's what delights investors, right, getting something back.
Let's talk about the challenges now for qunstous, because it's
not all beer and skittles. What are some of the
challenges that they're facing as you know, global economic conditions
just seem to be getting more and more volatile as
we step further into twenty twenty five.
Speaker 1 (08:48):
That's rights as well as as Hudson has performed. You know,
if you look at the bottom line, if you look
at the share price and the customer satisfaction metrics, is
that the raw data of how people assess her performance,
she could still come unstuck. There's no doubt on domestic front. Firstly,
(09:09):
let's look at the main competitive Virgin Australia. It's got
a new big international shareholder in Qatar Airways. It's buying
twenty five percent and that means that Virgin Australia can
open up it's international network. It can fly through the
Middle East, it can extend routes beyond their using Qatar Airways.
It's got a wealthy investor and it's no doubt, there's
(09:34):
no doubt that that presents a bigger competitive threat to Quantus.
So that's on the domestic front. You've also have a
couple of huge, sort of I guess fleet hurdles to
overcome that. She has to oversee the biggest basically the
biggest fleet overhaul in Quantus's history. So she has to
(09:55):
get that right because that really is critical to the
whole financial care when it comes to Quantus in terms
of cutting costs, running more efficiently, giving the passenger a
better experience. So she has to pay for that. Firstly,
she's also dealing with jet delivery delays because let's not
forget aviation is still going through the kind of the
(10:17):
pains of ruptured supply lines and many of the jets
that Quantus has ordered have been delayed. So there's that
big fleet overhaul, and probably the highest profile one is
the ten year plan as it is now to operate
NonStop flights between Sydney and New York and Sydney in
London what Quantus calls Project Sunrise, and they're going to
(10:40):
start in early twenty twenty seven. It's a flagship project.
But the demand for those kind of flights is untested,
Quantus would argue, and it does often, is that it's
confident there's demand because it's looking at the kind of
prices people are paying for Perth in Western Australia to London.
Our flight very popular, and Quantus argues that, well, people
(11:03):
want to pay for that kind of flight, then they'll
pay for a non stop seeing in New York flight.
That may be so, but it's still it's it's an
unproven route and it's got a you know, unless and
not yet convinced that the demand is there that will
make it a viable network.
Speaker 2 (11:20):
So you've been covering Quantus for Bloomberg for years and
you've been on Project Sunrise. Right, you've taken that flight,
that long flight. What do you think do you think
there's demand for sitting on an aeroplane for that amount
of time?
Speaker 1 (11:36):
Yeah, that was that was one of the test flights
a few years ago. Of course it wasn't on an
A through fifty because Quantas doesn't have them yet. That
they did these test flights on a Boeing Dreamliner and
they had to cut back on the payload just so
(11:56):
it was really a test flight to see how the
human body how it up for you know, a twenty
hour trip. And I think the answer is is it's
okay if you if you're in business and you're able
to afford that premium, and it will be a steep
premium over a stop in Singapore, for instance, maybe twenty
(12:17):
or thirty percent. It steeper, and that's okay if you're
willing to pay that. But if you're in economy, then
I think it's still an open question as to whether
you want to sit in even a more comfortable economy,
which Quantas says it will be a little more generous
on the legram, But twenty hours in the back of
the plane, I don't know. That's not for me.
Speaker 2 (12:35):
It's not for me either, and I, like you, I'm
not an active triathlete. But when we come back, let's
take a look at what other kinds of changes passengers
can expect to see a Quantus in the year ahead.
This is the Bloomberg Australia Podcast. Welcome back to the
Bloomberg Australia Podcast. You're here with me Rebecca Jones and
(12:59):
Global Business reporter Angus Widley angers, we've got an election
coming up in a matter of weeks and it's going
to be largely fought on the cost of living crisis.
So let's take a quick listen to what Vanessa Hudson
said about demand from Australians for airline travel despite these
daily pressures on our bank accounts.
Speaker 3 (13:19):
Really we're seeing it in all our customer segments. So
corporate travel is still recovering and it's growing. We're seeing
it in premium leisure, We're seeing it in low cost
particularly there's a cost of living pressures in Australia like
there are in many countries around the world, and despite that,
we're still seeing Australians want to take a holiday, whether
(13:41):
that be domestically because jet stuff flies pretty much to
all of the leisure destinations domestically, but also internationally to
all of the premium destinations that we have, but also
into Southeast Asia Bali's massive holiday spot, Korea, Vietnam, Japan particularly,
we're seeing so many Dralian's holidaying in Japan.
Speaker 2 (14:01):
And because why is it that Australians are still prepared
to fork out hundreds or thousands of dollars for holiday flights,
even though many people are doing it really tough.
Speaker 1 (14:11):
There's a few things at play here. I think firstly is,
you know, we're remote population, and we always we've always
loved to travel, so we're arguably willing to prioritize travel
costs above other household expenditure, maybe more than other other jurisdictions.
You know, if you're in Europe, you don't have to
(14:32):
fly to get away. Here, you pretty much do you
have to fly. And the second one, the second reason
is we don't really have a choice when it comes
to Quantus. We're essentially a two ail line market here.
Quantus is the giant in the domestic market, and so
if you're gonna fly, the chances are literally the chances
(14:53):
are you going to be flying Quantus. So it really
has a pretty captive market and a market that likes
to fly, and it's been really you could say, impervious
to this cost of living crisis. Is just the flavor
at the edges of what we're paying for. For instance,
Quantus has that jet Star brand, it's low cost airline,
which plays into this cost of living crisis a little bit,
(15:15):
but you're still flying Quantus. It's the Quantus group and
so jet Star has been the beneficiary of that sort
of change in taste. If you like, it's carrying a
record number of passengers, it's domestic earnings. We're up more
than fifty percent in the second half of twenty twenty four.
So you've got that at one end, and then at
(15:36):
the other end, Quantus has that sort of full service
brand that caters to the people who really are impervious
to a cost of living crisis, who don't really feel
the pinch, and i'd include corporate flyers, wealthy flyers, perhaps
retirees that aren't feeling it so much, that haven't felt
the raisin interest rates so much. And so there's if
(16:00):
you speak to Hudson, she talks about unprecedented demand for
premium travel and that includes premium economy, business and first class,
but also as we're seeing record demand in jetstraw as well,
so they've cornered the market at both ends. Really smart.
Speaker 2 (16:16):
Now a big deal has also been made over these
new aircraft orders that we mentioned earlier. Can you talk
us through what passages can expect from this upgraded fleet.
How is it going to impact our experience when we
get to the airport, onto the plane.
Speaker 1 (16:32):
Yeah, it's a massive step as as you said, it's
Australian Aviation's biggest fleet overhaul and what it involves is
newer generation aircraft that just look at it from the
Quantus perspective, first new generation aircraft that are more fuel efficient,
that require less maintenance, that offer a bigger range, which
(16:54):
means more flexibility on the routes that they can fly,
and that all adds up to a healthier bottom line.
And one of the most I think astonishing figures that
that Quantus has broken at in recent weeks is they've
tried to put a number, a dollar number on the
benefit to the bottom line, or not so much the
bottom line, but certainly one of barnings one of the lines,
(17:17):
if not the bottom line, that each aircraft at each
of these new aircraft offers. And so if you compare
the air boss A three twenty one XLR against the
seven three seven which Quantus is replacing, which is the
workhourse of the domestic fleet, you know this is one
the ones that have been flying for twenty years scratch, dented,
(17:38):
dusty or dirty. In many cases, you get five million
dollars down in terms of annual EBITDA for each aircraft
that's been replaced. If you go to the A three
twenty one long range, that's that's a ten million dollar
boost there. The A two twenty which is replacing the
Boeing seven one seven the old seven one sevens, there's
(18:00):
a nine million dollar boos there. So it all flows
down to the bottom line. Yes, Quantus has to pay
for them, but over the long run that there are
savings and they're a profit benefits stemming from those replacements.
From the customer point of view, you're essentially walking into
a brand new aircraft. And this is Quantus addressing what
has long been one of its one of its weaknesses,
(18:23):
particularly in the domestic front. And these old Boeing seven
three sevens, they've really coming a lot of them are
coming to the end of their they're working life and
they're starting to look shabby, particularly when you have a newer,
revitalized competitor in Version Australia. And so it's also one
of the reasons why Boeing is refurbishing some of the
seven three sevens that still have a few years left
(18:45):
in them. So from Quantas' perspective, it's trying to renew
the fleet with new aircraft, but also put a bit
more lipstick, if you like, on the older planes to
make them appear like new aircraft even if they're not.
Speaker 2 (18:58):
Yeah, you're quite right. I mean I think especially that
city flyer route between Sydney and Melbourne, they're turning over
those seven three sevens really quickly. A lot of those
planes don't have the seatback TV screens, even the cards
in the seatback pocket. You can see some of them
have seen probably better days. So that's very interesting. And
(19:19):
as you say, this is going to mean that eventually
it will help the bottom line, one of the bottom
lines for Quantus, but also give us that experience of
newer planes, which I think is starting to be noticed.
Speaker 1 (19:31):
Right, that's right. And when we sat down with Vanessa
Hudson in Hong Kong, one of the things we wanted
to know was sustainable is this before sounds good? And
she told us that, well, growth is about investment, she said,
and we're investing in the right things, and she means
by that this multi billion dollar fleet investment, because they
(19:51):
deliver these things like a happier customer, like more reliable services,
which then flows down into the bottom line. So it
comes back to that balance again of keeping the customer happy,
keeping the route running, that the network running reliably, which
also translates into benefits to shareholders as well.
Speaker 2 (20:12):
Now asking purely out of self for interest, does this
investment into fleet renewal happier customers booking more trips. Does
all of this give Quantas any impetus to cut the
price of flights?
Speaker 1 (20:26):
I think the numbers show that Quantus has little incentive
to cut prices because Australians have proven that they're willing
to pay these price points, every price point from the
sub one hundred dollar jet style fair up to the
premium fares the luxury births on NonStop flights to Europe
or Asia. So the drivers of lower fairs our competition,
(20:50):
aren't they primarily? And we may see that if Virgin
Australia starts to become a stronger competitor that has a
better international all offering, then yes, we might see Quantus
fares start to respond to that, and as capacity comes
back and on international networks, that will also inevitably drive
(21:11):
down prices. Yeah. I'd also say that one of the
factors driving up fairs at the moment is the lack
of capacity, So we should see fares start to have
room to come down when there is more capacity in
the market, and that's a global problem the aviation faces.
They just are not enough planes to meet demand.
Speaker 2 (21:30):
At the moment. Thankers, Billie, thank you for joining me,
and thank you for listening to the Bloomberg Australia podcast.
I'm Rebecca Jones. This episode was recorded on the traditional
lands of the Wondery people of the cool And Nation.
It was produced by Paul Allen and edited by Chris
Burke and Ainsley Chandler. Don't forget to follow and review
the show wherever you get your podcasts, and sign out
(21:52):
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dot com to subscribe.
Quante.
Speaker 2 (00:02):
Quantus is in damage control, facing a class action lawsuit.
Speaker 1 (00:05):
Customers have complained to poor service.
Speaker 2 (00:07):
In the wake of multiple scandals, cancelations, delays, lost bags.
Quantas became one of the biggest stories in corporate Australia
after the pandemic, and for all the wrong reasons. Now
a new boss seems to be winning over a lot
of those angry Aussie flyers. So how is she doing it? Hello,
(00:29):
I'm Rebecca Jones. Welcome to the Bloomberg Australia Podcast. Finally
things seem to be going right at Quantus and may
have taken four years, but our national carrier's share price
is now well above where it was before the pandemic.
But how much higher can the Flying Kangaroo leap? To
help answer that and more, Sydney based transport reporter Angus
(00:50):
Whitley is joining me today in our Melbourne studio Angers.
How was your flight?
Speaker 1 (00:56):
Yeah, Highbeck, it was. Unsurprisingly, it was full. It was
a Jet Star flight and true to form, there were
no spare seats on Jet style, which tells a story
in itself, doesn't it. When you look at Quantus's recent results.
Speaker 2 (01:09):
And you've recently returned home from a much longer flight
to Hong Kong where you had the opportunity to interview,
want to CEO Vanessa Hudson. How was that?
Speaker 1 (01:18):
That was a great opportunity because Vanessa Hudson doesn't do
a lot of media, and I don't think she has
done any international media, if you can call us that.
So it was really a great opportunity to sit down
with her talk about, you know, how she has done
what she's clearly done in the last eighteen months since
(01:39):
she took over, and also, you know how sustainable is
it from here? Can she keep doing what she's clearly done?
And what levers does she have left to pool having
really done, you know, a repair job if you like.
So far, given what Quantus was looking like when she took.
Speaker 2 (01:59):
Over exactly, well, why don't we start at the beginning?
What state was Quantus in when Hudson took over from
Ellen Joyce some eighteen months ago.
Speaker 1 (02:09):
Yeah, I think it's difficult to overstate the problems she
inherited from Quantus if you look back to those days
in twenty twenty three, pretty much since aviation opened up
again after the pandemic, Quantus had struggled to really cope
with the overwhelming reband in demand. So it was an
(02:31):
era you're remember, an era of high consolations of a
spike and lost bags. It was delays that they couldn't
get enough really people to staff the demand to meet
the demand, and Alan Joyce even became a kind of
byword for a trip that had gone awry. You'd been joiced.
(02:54):
If your flight was delayed or canceled, you'd been joiced.
And it really became a pylon. And then I think
I think probably the straw that broke the camel's back that
year was the age of WILLC, the competition regulator, suing
Quantus for allegedly selling tickets on flights that had already
been canceled. It became known as the ghost flights, if
you like, so that they were financially benefiting from flights
(03:17):
that were never going to take off. And as as
really the revulsion at that, I think it's probably not
overstating that the revulsion of those kind of claims simmered
over joy stepped down two months early, and so then
we had the introduction of Vanessa Hudson in September twenty
twenty three, with all these things to do on her
list isn't it. You've just tripped a memory for me.
Speaker 2 (03:38):
I remember flying for work when we reopened and having
to wait such a long time for my bags at
the carousel was one of the contributing factors to me.
Now only flying carry on, just that really long wait
at the end of a very long flight. Yeah, it
certainly does leave an impression on fire. Let's just say that.
(04:01):
Let's have a look at the recent success of Quantus Angus.
What specific changes has Vanessa Hudson made since she's taken
the reins.
Speaker 1 (04:10):
Well, there are cultural changes she's introduced, and there are
material changes, and there are resolutions to kind of long
running sores that had been weeping at Quantus. So first
of all, she apologized several times. So she spent the
first few weeks just apologizing in public, to staff, to shareholders,
(04:32):
to parliamentarians. And then the little things she did to
sort of refocus Quantisan on the things that probably had
been neglected. Was, for instance, Alan Joyce's internal communications at
the top was a share price, which is a taling
statistic to focus on, given that he was accused really
of focusing too much on investors. So that was his
(04:53):
metric that he communicated to stuff. Under Vanessa Hudson, she
peeled that back off and she put a metric called
on time performance at the top of her communications to stuff,
which is basically a gauge of reliability and punctuality. One
of the other really interesting things I think about Hudson
is her leadership style, and we talked a little about
(05:13):
this in the interview in Hong Kong and what kind
of leader are you? And she's really a different kind
of airline leader. The typical aviation CEO as we've seen
in the past ten years, is sort of bombastic, male
of a male outspoken, not dissimilar to Joyce that the
more similar kind of characters we've seen in global aviation
(05:35):
become the face of the airline and almost the airline spokesman.
High profile. Hudson is not that she is a low profile,
and she said to us she listens far more than
she speaks. So this all tells a story of rebalancing
Quantus away from investors and back towards passengers. If you
(05:57):
like swinging that pendulum back. She tries a line and
as one analyst told me, it's a delicate needle to thread.
Speaker 2 (06:05):
Quantas also has a huge amount of retail investors right,
so a lot of those investors are also passengers. He
does sound like it's all in the messaging. She was
also on Bloomberg TV this week as well, speaking to
us to Lose in France. Let's take a quick listen
to what she said about the demand for travel now
(06:26):
and how that's helping the airline turn around.
Speaker 3 (06:29):
We're seeing demand remain strong, strong domestically for both low
cost and premium, but also strong outbound as well. So
we're feeling really optimistic about the next six months and beyond.
And the appetite that Australians have for travel has remained strong,
and we've seen that now for a number of years.
Speaker 2 (06:46):
So Anger's shareholders seem to like what Vanessa Hudson has
been doing. The share price is up more than seventy
percent in the last twelve months, making it the second
best performer on the Bloomberg World Airlines Index. Telling you
about their outlook for Quantus's share price going forward.
Speaker 1 (07:06):
I think this is one of the great ironies of
Hudson's tenure is that she was brought on essentially to
sort of balance the equation a bit more away from
investors and they've ended up having an astonishing twelve months
of returns, So you set up more than seventy percent,
and if you look at the forecasts, there's more to come.
If you look at the market, the twelve month target
(07:27):
price among all the analysts that Bloomberg tracks is ten
dollars eleven. So look at the closing price as we
speak nine to thirty five. That the last closing price,
this forecast to get to ten eleven in the next
twelve months. And if you look at the most optimistic
broker in the market, which is Goldman Sachs, you know,
shouldn't know what they're talking about, shouldn't they gold eleven
(07:48):
dollars eighty. So there's there's more to come in terms
of investor returns. And then just beyond the naked share price,
Hudson has also reinstated the dividend. That's the first time
Quantus has paid a normal dividend since before the pandemic,
and there's a lot of focus on the sustainability of
that divinend. If you look at the kind of the
(08:09):
questions an lysts have asked Vanessa Hudson want to know,
is this a sustainable base from which to assume that
dividends will be paid, and I think the answer is yes,
as long as Quantus keeps generating the cash, it's in
a position now to pay dividends. And that's what striving
some of the share prices.
Speaker 2 (08:27):
Well, and that's what delights investors, right, getting something back.
Let's talk about the challenges now for qunstous, because it's
not all beer and skittles. What are some of the
challenges that they're facing as you know, global economic conditions
just seem to be getting more and more volatile as
we step further into twenty twenty five.
Speaker 1 (08:48):
That's rights as well as as Hudson has performed. You know,
if you look at the bottom line, if you look
at the share price and the customer satisfaction metrics, is
that the raw data of how people assess her performance,
she could still come unstuck. There's no doubt on domestic front. Firstly,
(09:09):
let's look at the main competitive Virgin Australia. It's got
a new big international shareholder in Qatar Airways. It's buying
twenty five percent and that means that Virgin Australia can
open up it's international network. It can fly through the
Middle East, it can extend routes beyond their using Qatar Airways.
It's got a wealthy investor and it's no doubt, there's
(09:34):
no doubt that that presents a bigger competitive threat to Quantus.
So that's on the domestic front. You've also have a
couple of huge, sort of I guess fleet hurdles to
overcome that. She has to oversee the biggest basically the
biggest fleet overhaul in Quantus's history. So she has to
(09:55):
get that right because that really is critical to the
whole financial care when it comes to Quantus in terms
of cutting costs, running more efficiently, giving the passenger a
better experience. So she has to pay for that. Firstly,
she's also dealing with jet delivery delays because let's not
forget aviation is still going through the kind of the
(10:17):
pains of ruptured supply lines and many of the jets
that Quantus has ordered have been delayed. So there's that
big fleet overhaul, and probably the highest profile one is
the ten year plan as it is now to operate
NonStop flights between Sydney and New York and Sydney in
London what Quantus calls Project Sunrise, and they're going to
(10:40):
start in early twenty twenty seven. It's a flagship project.
But the demand for those kind of flights is untested,
Quantus would argue, and it does often, is that it's
confident there's demand because it's looking at the kind of
prices people are paying for Perth in Western Australia to London.
Our flight very popular, and Quantus argues that, well, people
(11:03):
want to pay for that kind of flight, then they'll
pay for a non stop seeing in New York flight.
That may be so, but it's still it's it's an
unproven route and it's got a you know, unless and
not yet convinced that the demand is there that will
make it a viable network.
Speaker 2 (11:20):
So you've been covering Quantus for Bloomberg for years and
you've been on Project Sunrise. Right, you've taken that flight,
that long flight. What do you think do you think
there's demand for sitting on an aeroplane for that amount
of time?
Speaker 1 (11:36):
Yeah, that was that was one of the test flights
a few years ago. Of course it wasn't on an
A through fifty because Quantas doesn't have them yet. That
they did these test flights on a Boeing Dreamliner and
they had to cut back on the payload just so
(11:56):
it was really a test flight to see how the
human body how it up for you know, a twenty
hour trip. And I think the answer is is it's
okay if you if you're in business and you're able
to afford that premium, and it will be a steep
premium over a stop in Singapore, for instance, maybe twenty
(12:17):
or thirty percent. It steeper, and that's okay if you're
willing to pay that. But if you're in economy, then
I think it's still an open question as to whether
you want to sit in even a more comfortable economy,
which Quantas says it will be a little more generous
on the legram, But twenty hours in the back of
the plane, I don't know. That's not for me.
Speaker 2 (12:35):
It's not for me either, and I, like you, I'm
not an active triathlete. But when we come back, let's
take a look at what other kinds of changes passengers
can expect to see a Quantus in the year ahead.
This is the Bloomberg Australia Podcast. Welcome back to the
Bloomberg Australia Podcast. You're here with me Rebecca Jones and
(12:59):
Global Business reporter Angus Widley angers, we've got an election
coming up in a matter of weeks and it's going
to be largely fought on the cost of living crisis.
So let's take a quick listen to what Vanessa Hudson
said about demand from Australians for airline travel despite these
daily pressures on our bank accounts.
Speaker 3 (13:19):
Really we're seeing it in all our customer segments. So
corporate travel is still recovering and it's growing. We're seeing
it in premium leisure, We're seeing it in low cost
particularly there's a cost of living pressures in Australia like
there are in many countries around the world, and despite that,
we're still seeing Australians want to take a holiday, whether
(13:41):
that be domestically because jet stuff flies pretty much to
all of the leisure destinations domestically, but also internationally to
all of the premium destinations that we have, but also
into Southeast Asia Bali's massive holiday spot, Korea, Vietnam, Japan particularly,
we're seeing so many Dralian's holidaying in Japan.
Speaker 2 (14:01):
And because why is it that Australians are still prepared
to fork out hundreds or thousands of dollars for holiday flights,
even though many people are doing it really tough.
Speaker 1 (14:11):
There's a few things at play here. I think firstly is,
you know, we're remote population, and we always we've always
loved to travel, so we're arguably willing to prioritize travel
costs above other household expenditure, maybe more than other other jurisdictions.
You know, if you're in Europe, you don't have to
(14:32):
fly to get away. Here, you pretty much do you
have to fly. And the second one, the second reason
is we don't really have a choice when it comes
to Quantus. We're essentially a two ail line market here.
Quantus is the giant in the domestic market, and so
if you're gonna fly, the chances are literally the chances
(14:53):
are you going to be flying Quantus. So it really
has a pretty captive market and a market that likes
to fly, and it's been really you could say, impervious
to this cost of living crisis. Is just the flavor
at the edges of what we're paying for. For instance,
Quantus has that jet Star brand, it's low cost airline,
which plays into this cost of living crisis a little bit,
(15:15):
but you're still flying Quantus. It's the Quantus group and
so jet Star has been the beneficiary of that sort
of change in taste. If you like, it's carrying a
record number of passengers, it's domestic earnings. We're up more
than fifty percent in the second half of twenty twenty four.
So you've got that at one end, and then at
(15:36):
the other end, Quantus has that sort of full service
brand that caters to the people who really are impervious
to a cost of living crisis, who don't really feel
the pinch, and i'd include corporate flyers, wealthy flyers, perhaps
retirees that aren't feeling it so much, that haven't felt
the raisin interest rates so much. And so there's if
(16:00):
you speak to Hudson, she talks about unprecedented demand for
premium travel and that includes premium economy, business and first class,
but also as we're seeing record demand in jetstraw as well,
so they've cornered the market at both ends. Really smart.
Speaker 2 (16:16):
Now a big deal has also been made over these
new aircraft orders that we mentioned earlier. Can you talk
us through what passages can expect from this upgraded fleet.
How is it going to impact our experience when we
get to the airport, onto the plane.
Speaker 1 (16:32):
Yeah, it's a massive step as as you said, it's
Australian Aviation's biggest fleet overhaul and what it involves is
newer generation aircraft that just look at it from the
Quantus perspective, first new generation aircraft that are more fuel efficient,
that require less maintenance, that offer a bigger range, which
(16:54):
means more flexibility on the routes that they can fly,
and that all adds up to a healthier bottom line.
And one of the most I think astonishing figures that
that Quantus has broken at in recent weeks is they've
tried to put a number, a dollar number on the
benefit to the bottom line, or not so much the
bottom line, but certainly one of barnings one of the lines,
(17:17):
if not the bottom line, that each aircraft at each
of these new aircraft offers. And so if you compare
the air boss A three twenty one XLR against the
seven three seven which Quantus is replacing, which is the
workhourse of the domestic fleet, you know this is one
the ones that have been flying for twenty years scratch, dented,
(17:38):
dusty or dirty. In many cases, you get five million
dollars down in terms of annual EBITDA for each aircraft
that's been replaced. If you go to the A three
twenty one long range, that's that's a ten million dollar
boost there. The A two twenty which is replacing the
Boeing seven one seven the old seven one sevens, there's
(18:00):
a nine million dollar boos there. So it all flows
down to the bottom line. Yes, Quantus has to pay
for them, but over the long run that there are
savings and they're a profit benefits stemming from those replacements.
From the customer point of view, you're essentially walking into
a brand new aircraft. And this is Quantus addressing what
has long been one of its one of its weaknesses,
(18:23):
particularly in the domestic front. And these old Boeing seven
three sevens, they've really coming a lot of them are
coming to the end of their they're working life and
they're starting to look shabby, particularly when you have a newer,
revitalized competitor in Version Australia. And so it's also one
of the reasons why Boeing is refurbishing some of the
seven three sevens that still have a few years left
(18:45):
in them. So from Quantas' perspective, it's trying to renew
the fleet with new aircraft, but also put a bit
more lipstick, if you like, on the older planes to
make them appear like new aircraft even if they're not.
Speaker 2 (18:58):
Yeah, you're quite right. I mean I think especially that
city flyer route between Sydney and Melbourne, they're turning over
those seven three sevens really quickly. A lot of those
planes don't have the seatback TV screens, even the cards
in the seatback pocket. You can see some of them
have seen probably better days. So that's very interesting. And
(19:19):
as you say, this is going to mean that eventually
it will help the bottom line, one of the bottom
lines for Quantus, but also give us that experience of
newer planes, which I think is starting to be noticed.
Speaker 1 (19:31):
Right, that's right. And when we sat down with Vanessa
Hudson in Hong Kong, one of the things we wanted
to know was sustainable is this before sounds good? And
she told us that, well, growth is about investment, she said,
and we're investing in the right things, and she means
by that this multi billion dollar fleet investment, because they
(19:51):
deliver these things like a happier customer, like more reliable services,
which then flows down into the bottom line. So it
comes back to that balance again of keeping the customer happy,
keeping the route running, that the network running reliably, which
also translates into benefits to shareholders as well.
Speaker 2 (20:12):
Now asking purely out of self for interest, does this
investment into fleet renewal happier customers booking more trips. Does
all of this give Quantas any impetus to cut the
price of flights?
Speaker 1 (20:26):
I think the numbers show that Quantus has little incentive
to cut prices because Australians have proven that they're willing
to pay these price points, every price point from the
sub one hundred dollar jet style fair up to the
premium fares the luxury births on NonStop flights to Europe
or Asia. So the drivers of lower fairs our competition,
(20:50):
aren't they primarily? And we may see that if Virgin
Australia starts to become a stronger competitor that has a
better international all offering, then yes, we might see Quantus
fares start to respond to that, and as capacity comes
back and on international networks, that will also inevitably drive
(21:11):
down prices. Yeah. I'd also say that one of the
factors driving up fairs at the moment is the lack
of capacity, So we should see fares start to have
room to come down when there is more capacity in
the market, and that's a global problem the aviation faces.
They just are not enough planes to meet demand.
Speaker 2 (21:30):
At the moment. Thankers, Billie, thank you for joining me,
and thank you for listening to the Bloomberg Australia podcast.
I'm Rebecca Jones. This episode was recorded on the traditional
lands of the Wondery people of the cool And Nation.
It was produced by Paul Allen and edited by Chris
Burke and Ainsley Chandler. Don't forget to follow and review
the show wherever you get your podcasts, and sign out
(21:52):
for Bloomberg's free daily newsletter, Australia Briefing. Go to Bloomberg
dot com to subscribe.
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