(Bloomberg) -- Qantas Airways Ltd.’s new boss Vanessa Hudson started work trying to restore the airline’s battered reputation with increased spending on major customer bugbears such as on-board catering, call-center staffing and loyalty-point flight redemptions.
Less than three weeks after taking the helm, the new chief executive officer has been forced to fix stress points that fractured under predecessor Alan Joyce. Since pandemic travel restrictions eased last year, a spike in flight cancellations, lost bags and telephone wait-times have frustrated passengers. The airline’s simultaneous record profits reinforced the perception that Joyce neglected customers to bolster the airline’s bottom line.
In a statement Monday, Qantas said it will spend an extra A$80 million ($52 million) on so-called passenger improvements in the year ending June 2024, in addition to the A$150 million previously allocated for the job. There will be more and better trained workers in Qantas call centers, larger numbers of seats available for air miles, and more generous support for passengers when things go awry, the airline said.
The airline also warned that its fuel bill will swell by A$200 million to A$2.8 billion for the six months ending December if oil prices remain elevated. Qantas also expects an additional A$50 million hit from unspecified foreign-exchange movements.
Shares in Qantas fell as much as 2.3% in early Sydney trading, touching their lowest level in almost a year, as investors digested the potential hit to profit margins. The stock was down 1.6% at A$5.23 at 11:54 a.m. local time.
“All the challenges faced by the airline at the moment do not bode well for its stock price,” said IG markets analyst Hebe Chen. “There’s a significant impairment cost associated with its damaged reputation and diminished trust. Escalating oil prices are putting further pressure on its profit margins.”
As the airline attempts to woo back disgruntled passengers, Qantas is also being bashed by regulators, the judicial system and lawmakers. Australia’s top court this month ruled that the airline illegally sacked almost 1,700 ground workers during the pandemic, opening it up to compensation payments. In August, the country’s competition watchdog sued Qantas for allegedly taking payment for seats on flights that were already canceled. It wants a record fine to be imposed.
And an ongoing parliamentary inquiry is probing the airline’s influence on national aviation policy after the government this year blocked a request by Qatar Airways to operate more flights into Australia following lobbying from Qantas.
Hudson on Friday sent a video apology to customers.
“We know that we’ve let our customers down and we’ve got some things wrong, and I want to say that we’re sorry,” she said. “I want you to know that we’ve heard you, and that we are working hard to rebuild your trust in us.”
Still, there’s little sign that Qantas is losing business from all its troubles. “Overall travel demand remains strong,” Qantas said Monday. It even flagged further hikes in fares in coming weeks if fuel prices stay where they are.
“Any changes would look to balance the recovery of higher costs with the importance of affordable travel in an environment where fares are already elevated,” Qantas said.
Qantas and its low-cost division Jetstar expect to carry more than 4 million passengers over the September and October school holidays and Australia’s traditional end-of-season sports finals. This compares with around 3.7 million passengers over the same four-week period last year, it said.
(Adds potential A$200 million hike to fuel bill in fourth paragraph, analyst comment in sixth paragraph.)
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