00:01It is significant, yeah, and I don't think it's very much of a surprise really.
00:06It makes a lot of sense to reduce capacity a bit, which is essentially what the Prime
00:12Minister is asking us all to do anyway, when we're driving and just basically conserving
00:18what fuel there is, because we really don't know how much is going to be coming down the
00:23line.
00:24In terms of the impact, it does involve obviously reducing some services, which on the other
00:32hand, as long as demand remains reasonably high, means fuller aeroplanes, so there is a bit
00:38of a trade-off for Qantas in terms of revenue side.
00:43I think one of the things we're starting to see, of course, is fares going up, and no doubt
00:50the ACCC will be watching very closely to see that the relative increase in costs has
00:58some sort of balance with the increase in fares.
01:01Yeah, some Qantas fares have already been increased.
01:04Do you think that could be a sign of more to come?
01:07How do you think prices will be affected longer term?
01:10Well, there are a lot of things in flow here, of course, and the big U uncertainty is something
01:19that really makes most businesses, I think, urge on the side of caution.
01:27It's very simple to raise prices, particularly in a market where there's not a whole lot of
01:32competition.
01:33But if the demand isn't there, then raising prices isn't going to have an impact, and
01:38I think the economic situation is looking increasingly uncertain at the moment as this war drags on,
01:44or the non-war, or the peace, or whatever it is.
01:48And therefore, the demand side starts to become a bit of an issue very soon if things do drag
01:58on.
01:58Just explain the impact that fuel prices are having on Qantas's bottom line.
02:03It says it's hedged about 90% of its exposure to crude oil in the second half of this financial
02:09year, but that it's still exposed to changes in jet refining margins.
02:13Can you explain what's happening there?
02:16Yeah, hedging is a very complex process.
02:19It's really a type of insurance policy.
02:22It's not a gaming thing.
02:23It's just a matter of taking a policy decision to make yourself able to predict what your
02:31costs are going to be in future.
02:32Because it's such a large part of the uncontrollable cost, then it's a very sensible thing to do.
02:38As you suggested there, you hedge the oil price.
02:43You hedge the jet fuel price.
02:45You're actually at the same time hedging the dollar price, because this is all paid for
02:50in US dollars.
02:52The Australian dollar has gone up a bit over the last few months, which strengthens things
02:58a bit there.
02:58But yes, the fact that they have got the oil price hedged is definitely a benefit.
03:03But then the split between the basic crude oil price and the jet fuel price is much larger
03:14than the actual increase in crude oil prices.
03:16So it's very much a moving target.
03:20That may well come down.
03:22It depends what happens with our major suppliers of China, Singapore, South Korea and the like,
03:29whether they are prepared to release fuel, because it's, again, it's supply and demand
03:34that decides the price there.
03:36And Qantas hasn't announced any job losses at this stage.
03:39Is that a risk if this global fuel crisis drags on?
03:45Oh, if it drags on for a long time, yes.
03:48I mean, it's a risk for, I think, every company.
03:53There's nothing in the very short term, I think, that suggests there will be reductions
03:57in staffing.
03:59Perhaps some of the temporary staffing, the casual staffing may be reduced, obviously,
04:07on some of the routes where reductions are occurring.
04:10But it's not yet the time, I think, to be making serious long-term decisions on staffing numbers
04:19and other expenses.
04:22I mean, one of the areas which is obviously going to be looked at very closely now is the
04:26capital expenditure.
04:27There's a very large order coming through.
04:32And there's a relationship with the share price.
04:35The shareholders don't like to see too much capital expenditure coming down the wire if
04:40the share price is languishing.
04:41So there's a whole lot of things in play here.
04:44But for the time being, I think what Qantas is doing is taking a cautious approach to just
04:50preparing for anything that might come down the road.
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