Christopher Niesche: Qantas passengers lose patience

Photo / AP

No industry was more affected by the coronavirus pandemic than the airline sector.

And more than two years since we first heard the words Covid-19, Qantas is still struggling with the ongoing effects of the global pandemic.

Qantas reported a A$1.9 billion ($2.09b) underlying loss in the 2022 financial year, which brings its total pandemic-related losses over the past three years to over A$7b.

The airline plans to cut more flights in the coming six months as it grapples with high fuel prices and unprecedented numbers of sick staff. Chief executive Alan Joyce said last week that 320 pilots called in sick or were in isolation every day, with combined Covid-19 and flu waves causing a big "double peak" in illness.

Along with damage to the airline's bottom line, Covid-19 has also inflicted huge damage to Qantas' reputation.

Travellers were prepared to forgive the airline early in the pandemic.

But as things return to a new normal, they are losing patience.

Qantas has been savaged in recent months for cancelled flights, huge delays, lost luggage, tortuous call centre waits, extremely slow flight refunds and an impenetrable frequent flyer redemption system.

There's been a social media pile on where frustrated travellers (and would-be travellers) have taken to Twitter, Facebook and LinkedIn to vent their frustrations. The dissatisfaction hit its apotheosis last month when Joyce's recently-purchased A$19 million harbourside home in Sydney was pelted with eggs.

Joyce said high levels of sick leave were the biggest problem for the airline operationally. Combined with sky-high fuel prices, it has forced a 10 per cent cut in domestic capacity for the next six months as Qantas tries to improve its reliability.

This is the third cut to capacity the carrier has issued this year. Qantas earlier sought to achieve 115 per cent of pre-virus flight capacity by the first quarter of the 2023 financial year. It now aims for 95 per cent. In June, Qantas' budget arm Jetstar cancelled about 1 in 11 flights.

The earlier, more ambitious, target suggests some of its customer service problems are of its own making and that it might have tried to ramp up capacity too soon, before it had enough staff available to ensure it could get passengers where they wanted to go, on time, and provide assistance when they needed it.

So concerned is Qantas about the blows to its reputation that it is offering frequent flyer customers A$50 vouchers.

Its next test will come during next month's school holidays, when it faces another surge in demand.

Two-thirds of Qantas' planes are currently taking off on time, compared to a little over 50 per cent in July. This is planned to increase to 75 per cent next month, and 80 per cent in October.

Currently, demand for flights outstrips supply, so Qantas' customer base is safe.

But as more airlines add capacity, and as consumers and businesses potentially reduce travel in the fact of an economic slowdown, travellers will have more choice about who they fly with. If they still have a bad taste in their mouths about poor service from Qantas, many are likely to go elsewhere.

Tip of the iceberg

After surging to $12 each earlier this year, iceberg lettuces have dropped back to $3 each.

It's good news for salad-loving shoppers, but for the most part consumers will be grappling with inflation for some months to come.

They are already adjusting their spending habits, according to supermarket bosses.

Shoppers are switching from minced beef to cheaper chicken and pork, and from fresh vegetables to frozen and canned, Coles' Steven Cain and Woolworths' Brad Banducci said last week as they reported their companies' most recent earnings.

So far, the effect is limited to a few pockets around the nation, while affluent consumers are still spending on branded goods and fresh food.

Woolworths average prices increased by 3.6 per cent in the three months to June while, at Coles, food prices went up by 3.8 per cent in six months. And there are more price rises to come, with suppliers to supermarkets asking for price increases at five times the usual rate.

These are hefty price rises for shoppers who've grown used to tepid, sub-2 per cent inflation over the past decade.

The good news for supermarkets is, as shoppers tighten their belts, they continue to buy groceries. They could in fact benefit as more consumers cut back on eating out and takeaway.

Other companies leveraged to the household sector will also be relatively unaffected by inflation on their customer spending.

As analysts from broker Bell Direct point out, these include logistics company Brambles, which derives 90 per cent of its revenue from supplying food and beverage customers with reusable pallets, crates and containers. Likewise, Cleanaway Waste Management earns 75 per cent of earnings from collecting, processing and disposing of household and commercial waste.