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00:00Qantas has had a pretty phenomenal run under your leadership over the last three years.
00:04And there are a lot of questions now about the expansion of routes over the next couple of years.
00:09About one year from now, you'll be able to go from Sydney to London direct on Qantas.
00:15And I'm now told that maybe a year after that, you'll now be able to go from New York to
00:20Sydney as well.
00:21Yeah, look, this is an incredibly exciting time for our fleet renewal.
00:25So Qantas is buying 12 A350-1000 ULR aircraft.
00:30They're specifically configured to be able to fly long distance.
00:34And so October next year, we'll be flying from Sydney to London direct.
00:40And not long after that, at early 2028, we're going to be flying from Sydney to New York direct.
00:47And so this is actually the first time really in Qantas's history that we are breaking the tyranny of distance.
00:54Australia can be, I think, for many people, a long way away.
00:58So here's a flight.
01:00You don't have to stop.
01:01You don't have to transit.
01:02You can get there directly.
01:04The tyranny of distance, I like that.
01:05How comfortable is that distance going to be?
01:07It's going to be incredibly comfortable.
01:09So this is the opportunity that we have had to design the customer, in-flight customer experience from the ground
01:15up.
01:15So whether you're in first class, business class, premium economy or economy, we've got well-being zones.
01:21We've actually also worked with Charles Perkins, which is a unit of Sydney University, to really study long distance flying
01:29and study also the impact of flying and jet lag.
01:33And so we've designed not just the comfort in the seat, but the actual in-cabin experience from when you
01:40eat, what you eat, but also the lighting.
01:43Because lighting and the circadian rhythm, which is a part of what Charles Perkins has helped us understand, is an
01:49incredibly important part of how you manage jet lag.
01:52And the studies that we've been doing have been over a decade.
01:55So this is not something that's just occurred in the short term.
01:58And we can see that it has had a really big impact on customer comfort.
02:03Well, with regards to that comfort, I clearly understand why a business class or first class ticket holder would be
02:09willing to endure this.
02:11On the economy side, what is going to be offered to those folks, not only just to make it comfortable,
02:17but also from an economical standpoint, to make it actually worth their while as opposed to just doing a connecting
02:23flight?
02:23Well, I think the one thing that is really important that sits behind the whole concept behind this ultra long
02:30range is that we're currently doing it.
02:32So this is not a leap of faith from a customer or an economic perspective.
02:37We launched Perth London services more than five years ago now.
02:42And that service is absolutely the highest performing commercial route that we've got in our network.
02:49But it's also the highest customer satisfaction in our network in every cabin.
02:55And so we actually know that there is a segment of our customer base that wants to get there direct,
03:01that doesn't want to stop in the midpoint.
03:04And they're actually prepared to pay premium for that.
03:06And we've designed the experience to make sure that we maximise their comfort.
03:11And the feedback that I get from customers is that they love it across every cabin.
03:16When is the first Project Sunrise plane actually going to be available to you?
03:20Is that still the timetable still for that to come through in April?
03:23Yeah, April.
03:23So the first aircraft actually comes in April.
03:27We had a test aircraft, which is one of our aircraft fly from Toulouse to Melbourne a couple of months
03:33ago.
03:33And then it flew back to Toulouse over the United States and broke the Guinness Book of Records for the
03:39longest flight of any commercial aircraft.
03:42And so we know the aircraft is performing really well.
03:45And we're so excited to see the first one actually arrive in our livery with our seats in April next
03:51year.
03:51I mean, you're obviously taking orders, ticket orders for these seats months in advance.
03:55How confident are you that you're actually going to be able to meet that deadline for the first flight?
04:01Have you been in discussions with Airbus to make sure that they actually come through on delivery with all of
04:06these planes by the time you need them?
04:07Yeah, look, tickets go on sale in February next year.
04:10So it's a bit of time left.
04:11But as you say, we're working incredibly closely with Airbus.
04:14I mean, the thing I would say about Airbus and Qantas, this has been a collaboration to ensure that this
04:21aircraft has all of what it needs to do the mission,
04:24both from an engineering perspective, but a certification perspective.
04:28And we couldn't have been happier with the way Airbus have worked with us.
04:31We've still obviously got a few months to go now.
04:34But as each month goes past, we're getting more and more confident that it's going to arrive on time.
04:39Once that New York route is up and running, what becomes of your relationship with American Airlines and the long
04:45haul routes that you can see?
04:46Well, American Airlines is an incredibly, incredibly important partner.
04:49We actually connect over Dallas to over 200 destinations in the U.S.
04:55And they will continue to be an incredibly important partner because we are also not just going to have these
05:01direct services.
05:02We're continuing to go and have customers that will want to go through Dallas or Los Angeles as well.
05:08And so as the market grows, this capacity is just going to help us grow with the market and also
05:14grow with American Airlines as well.
05:16How much of your growth for Qantas right now, particularly looking forward, is going to come from international flights relative
05:22to domestic?
05:23Well, I think the growth that we're actually projecting for international and domestic is actually in line with the underlying
05:30growth and demand,
05:31which is around two to three percent per annum over that period of time.
05:34And so we feel very confident that the aircraft that we're getting, both domestically and also internationally,
05:40is going to enable us to grow with that market and that demand.
05:44Have you seen any shifts in trends with regards to leisure travel relative to business travel?
05:50Well, interestingly, the majority of our customers internationally is leisure.
05:56It's about 75 percent leisure.
05:57And we have seen that remain incredibly resilient through this period of time.
06:02So we have two international airlines within the group.
06:06One is Qantas, which is more premium leisure.
06:08And we're seeing that continue to be very strong, but also want a more premium experience.
06:15So we're putting more premium seats on our aircraft business and also premium economy.
06:20But we also have a low cost carrier as part of our group, Jetstar.
06:24And Jetstar serves an incredibly growing part of our network into Indonesia, Asia, Japan, Vietnam.
06:34And the growth in that segment of the market is incredibly robust at the moment.
06:38And so both of our businesses are growing internationally out of Australia.
06:42As you add more premium seating and more premium features to the aircraft,
06:46how much headroom does that give you in terms of raising ticket prices to actually account for that?
06:52How much more headroom is there for customers to actually absorb or they're willing to?
06:56Well, I think it's all about demand.
06:58And we're seeing demand be very strong.
07:00And this is not something that's just happened in the last year.
07:03This was actually a global demand that was happening before COVID.
07:07And so we are seeing the demand for those cabins,
07:11but also the premium that those customers are prepared to pay to travel in those classes.
07:17And it's remained very stable.
07:19And so this is a feature of our new international aircraft and configuration that is coming.
07:25But it's also complemented by Jetstar as well,
07:28because we also know that there is groups of customers that want that affordable holiday.
07:33And they also want that budget airline to travel there.
07:37And so we're very,
07:39very fortunate at the Qantas Group that we've got this dual brand,
07:42both serving both parts of the market, which are both growing.
07:47Talk to me a little bit about your costs, particularly when it comes to fuel.
07:50This has obviously been a very volatile year for energy prices.
07:53I know you've done a pretty good job at hedging, at least at the Brent crude oil level,
07:58not so much necessarily on the refined products.
08:01Have you started to think a little bit more about hedging more on some of the refined fuel products?
08:06Well, as you say, I mean, this year and continues to be in the outlook,
08:11a period of time where we've seen fuel prices at an elevated level that we really haven't seen for a
08:17long time.
08:17So we have, over the last decade, maintained a very consistent approach to hedging.
08:23But as you say, we've been hedging in Brent rather than the full refined product.
08:27We're constantly looking at the opportunity for us to put refiner's margin hedging in place.
08:33But at the moment, that is also very expensive.
08:35And so what we're doing to manage costs is we're managing our capacity.
08:40So making sure that our capacity is well matched to demand.
08:44And also internationally, we are seeing some markets where we've got incredibly strong demand.
08:49So we're redeploying capacity, particularly for Australians who want to get through to London and also Europe.
08:56And we are seeing, because of that demand, we're seeing strong growth in revenue.
09:00So in our outlook statement that we gave a couple of months ago,
09:04we are seeing in the first half of this financial year for us, which finishes in December,
09:10a total revenue growth in the vicinity of 8% to 10%.
09:13And so that goes some way in mitigating the impact of fuel.
09:17But we are constantly having to manage that as we go forward.
09:21How much has your aggregate capacity come down so far overall?
09:25Domestically, it's coming down around about 5%, 3% to 5%.
09:28Internationally, we are, though, growing because we've got all of our A380s are now back post-COVID.
09:35And also we're redeploying capacity into those markets where we see this incredibly strong demand,
09:41which is up through Singapore to Europe and also to London.
09:46And so that is an important part of how the two networks are responding to the impact of fuel.
09:52Well, I ask that as well, too, because just for investors, I mean, there are a lot of people
09:56that want to know about the durability of longer-term growth and how much of some of the recent gains
10:01that you've seen in revenue and, for that matter, profitability are because of those capacity cuts
10:06and how much of that is actually real demand.
10:08Oh, look, I think that the basis of our revenue growth is absolutely real demand,
10:13and we are seeing that across both our domestic markets and also international markets.
10:19And the new aircraft that we've actually got coming are an important part of the way
10:23in which we're going to continue to serve those customers because the new aircraft that are coming are more efficient.
10:29The narrow-body aircraft that we've got are 20% more efficient,
10:32and also the wide-body aircraft that are coming and the earlier replacement of the A380
10:38is actually going to be a big part of the improvement in our earning performance
10:44for our international businesses going forward.
10:46So we've got to manage, obviously, the revenue environment and the cost environment,
10:50but the investments that we are making are going to enable us to grow our profit over this period.
10:56And so that's why we're incredibly excited about these new aircraft.
11:00And finally, I do just have to ask you about what's going on on the labor side.
11:04I know that there was talk of ground workers staging a 24-hour strike,
11:08I think starting sometime today or, I guess, tomorrow, Australia time.
11:13Give me a sense here as to have you mitigated the issues
11:16that would actually either blunt the impact of that or mitigate it altogether?
11:21And has there been any further discussions about a longer-term resolution to some of these labor issues?
11:25I mean, the one thing I'd say is that, you know,
11:28we work very closely with our unions and our workforce in Australia.
11:34We want to find a pathway to resolve the differences that we have,
11:39but we also respect the right of those labor groups to take action through this process.
11:43As you say, we've got contingencies in place to mitigate the impact on our ground services.
11:50But we are absolutely wanting to sit down and welcome, you know,
11:55the unions coming back to the table and working constructively with us
11:58to find a balanced outcome for both the employee group but also the business.
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