Jetstar is eating Qantas

The August operational statistics for the Qantas brands provide measures of the rise of Jetstar at the mainline brand’s expense that the group’s management continues to resist discussing with shareholders and employees.

But the child is eating the parent, and so is Virgin Blue and Singapore Airlines controlled Tiger Airways (Australian division).

In August the Qantas group boarded a total of 3.25 million passengers.

The breakdown in head count in August shown in the ASX filing (above) includes a stand out fall of –25.9% in Qantas international passenger numbers compared to August 2008.

A major factor in an overall gain of 6% in total passengers boarded in the month compared to a year earlier was the doubling of the Jetstar international up lift by 207% (not the tabulated 107%).

In domestic services, compared by the raw numbers of paying passengers boarded, and then by RPKs or passengers by distance flown, Jetstar domestic comprised just over 28% of the 2.459 million customers for all three brands and 39% of the passenger activity adjusted for trip length.

At 694,000 passengers that month, Jetstar domestic was nearly half the size of Qantas domestic on 1.4 million passengers.

On international routes, on the same basis, Jetstar picked up 41% of the total head count of 791,000 passengers, or almost 70% as many as did the full service Qantas flights.

However compared by passengers times distance flown, Jetstar only performed 22% of the total Qantas international revenue activity that month.

It ought to be obvious that as Jetstar gains long range jets, it will contribute a much larger proportion of Qantas international revenue, and if the strategy goes to plan, also lift total Qantas long haul market shares by giving it competitive access to routes long abandoned by the main line brand.

(When this happens is the question. If the Dreamliner fiasco drags on to 2015, or otherwise fails to deliver, the dreams of timely and rapid long haul Jetstar expansion to Europe are toast.)

The yield figures for August were as bad as Qantas CEO Alan Joyce predicted in general terms when he discussed the 30 June financial year results.

A massive amount of loss making stimulus fares were sold in the closing months of last financial year, and not just by Qantas, as airlines looked for cash to feed their fixed cost obligations and conserve their reserves with more urgency than they looked for profits.

Those ‘cheapies’, huge numbers of loss making fares, will not work their way through the accounts of Qantas and its competitors until after the end of year holiday season. And there is as yet scant evidence of the carriers being able to lift fares back to levels which will repair the damage already done to this year’s performances.

While the airlines at large try to stem the losses, the gutting of Qantas by Jetstar is picking up the pace, accelerated by what some analysts see as a longer term shift in corporate travel to cheaper and less frequent trips.

Qantas management has for more than three years aggregated aspects of its operational data to avoid revealing the comparative profitability of the Jetstar and mainline brands or reveal whether there is significant cross subsidisation of the expansion of Jetstar occurring at the expense of Qantas.

This obscures the truth as to whether, as its unions claim, the group is deliberately feeding Jetstar to bring down change resistant work practices in its Qantas brands.

Whatever the truth, the figures make it clear Jetstar is on course to eclipse Qantas domestic, and with the right fleet, become the dominant long haul brand in the coming decade.