Opinion
How Vanessa Hudson scored on her maiden Qantas result
Elizabeth Knight
Business columnistThis week, the United States was laser-focused on this year’s most consequential profit – the chipmaker that dominates the sharemarket and is a proxy for the AI revolution, Nvidia. In Australia, all eyes were on the maiden earnings performance of Qantas boss Vanessa Hudson. Spoiler alert: she passed.
Qantas and Hudson’s performance isn’t a patch on the significance of Nvidia’s earnings, but watching the fortunes of our flag-bearing carrier has become a national pastime.
Qantas chief executive Vanessa Hudson has a balancing act.Credit: Dominic Lorrimer
Hudson and her team of brand-shapers liberally overused the term “balance”. At the risk of over referencing the recent Olympics, her performance wasn’t gold, but it was certainly solid.
She won’t match Simone Biles on the beam, but running Qantas in today’s environment should score points for difficulty.
To be fair, she had been lumbered with the handicap of poor customer decisions made in earlier rounds by her predecessor, Alan Joyce. So Hudson had a lot of ground to make up.
And yes, Hudson needed to balance the customer needs/demands that Qantas flights run on time and are not cancelled, the cost of offering some improvements and industrial relations peace, against gold-plating the profit for another year.
Hudson had been lumbered with the handicap of poor customer decisions made in earlier rounds by her predecessor, Alan Joyce. So she had a lot of ground to make up.
Qantas decided to provision $70 million to redress the illegal sacking of 1700 ground handlers, and it is up for a $60 million bill to upgrade cabin staff wages to comply with new governments laws on “same job same pay”.
Again thanks to the Joyce legacy, Qantas has long had a very fractious relationship with its staff, and improving this needs to be a priority.
But more broadly, Hudson had to ensure that Qantas’ service matched up with the price premium paid by customers who fly on a kangaroo-bearing aircraft.
This required – for the first time in living memory – Qantas shareholders taking a hit for the team. That said, it wasn’t a big one.
Shareholders were never going to get a dividend in the 2024 financial year because the balance sheet doesn’t have a pool of franking credits. They are up for one in the second half of the 2025 financial year.
Investors got a hit of sugar with Qantas’ announcement on Thursday that it will undertake a $400 million share buyback – a sensible plan given Qantas’ share price is arguably undervalued.
Thanks to falling fares and the aforementioned investment in service, the underlying profit fell by 16 per cent – but it was in line with what the market had predicted. And falling fares (which are the result of more international and domestic capacity) was a larger contributor to the falling profit than the $230 million investment in customer service.
And even the most avaricious of shareholders would understand that undermining customers is not a long-term recipe for success.
The single most important metric contained in Qantas’ result – the “net promoter score” (the measure of its reputation) – rose 15 per cent to 67 out of 100. At its highest pre-COVID-19, this number hit 80, so that remains a work in progress for Hudson.
But the heroes of the Qantas show were its budget brand, which earned the star in Jetstar, and its loyalty business – both of which managed to improve their contribution to group earnings.
Jetstar grew its domestic capacity by 15 per cent as cash-strapped consumers looked for value in fares, and despite the cost-of-living malaise, prioritised a holiday over other discretionary spending.
According to Qantas’ survey on travel intentions over the next 12 months, demand is stable while of the frequent flyers polled, 13 per cent said they would spend less on homewares, while 6 per cent could spend less on entertainment.
The state of consumer demand for flying has gone in Hudson’s favour so far. The risk is that this won’t continue.
Qantas’ budget brand earned the star in Jetstar.Credit: Paul Rovere
Recovering and growing profit in the near to medium term hinges in large part on the new fleet of aircraft in which Qantas is investing.
They will be cheaper to run and some new routes, such as those included in the Sunrise Project, will be able to command higher fares.
Hudson will need all the help she can get to take $400 million in costs out of the airline in 2025 in a period of inflation.
Achieving that really will be worthy of a medal.
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