Qantas reduces first class seats as profits fall
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Saturday, February 20, 2010
Qantas Airways says it is cutting first class seats from all but a few routes after reporting a 72% drop in profits.
Net income for the six months to 31 December 2009 was 58m Australian dollars ($52m; £33m), down from A$210m a year before. The company blamed the figures on a drop in customer demand and said it was scrapping dividend payments.
But chief executive Alan Joyce said he was pleased the airline had remained in profit, unlike other carriers. "While the operating environment has been unprecedented and challenging, this result reflects the strength and diversity of our operations," he said in a statement.
However, shares in Qantas closed down 8.1%, at A$2.73, after the release of the results.
Qantas said passengers would only be able to fly first class between Australia and London, via Singapore, and between Australia and Los Angeles, because of a drop in demand in the wake of the worldwide economic downturn.
Qantas also announced it would invest in a $400m upgrade seats and in-flight entertainment on nine aircraft.
Laurie Price, of aviation consultancy Mott Macdonald, said the move to cut first class was indicative of a wider structural change in the airline market.
"Customers are saying 'Do I actually need to travel first class when I can get a good service in Business Class?', he said. "What we're seeing is a gradual trade down in the premium classes."
On Monday, French-owned CityJet launched a new cheaper class, premium economy, to replace the current business class across its entire network.
"A lot of companies have changed their travel policies and basically abandoned business class," said Geoffrey O'Byrne White, chief executive of CityJet.