Feb. 21 (Bloomberg) -- Qantas Airways Ltd., Australia’s biggest airline, forecast an increase in business class fares as demand recovers after a global travel slump.
“We are seeing the business market demand improve,” Alan Joyce, chief executive officer of Sydney-based Qantas, told Sky News Business today. “The economics will have to change and fares, particularly in business class, will have to increase.”
Qantas will scrap first-class cabins on most routes after a slump in demand for its most expensive seats led the company to last week book a 72 percent drop in first-half profit. Revenue is expected to improve in the second half, Joyce said today.
“We continue to believe management is being conservative in its revenue outlook, with potential improvements in corporate travel the swing factor we think could drive a better-than- expected result,” Mark Williams and Michael Newbold, analysts at the Royal Bank of Scotland Group Plc in Sydney, wrote in a Feb. 18 report to clients.
Qantas shares have dropped 8.4 percent in 2010, closing at A$2.74 on Feb 19, compared with a loss of 4.8 percent for the benchmark S&P/ASX 200 Index.
After losing $50 billion over the past decade, the global airline industry may lose another $5.6 billion this year, according to the International Air Transport Association. Qantas forecast annual pretax earnings of A$400 million ($356.4 million), trailing analyst estimates for about A$530 million.
Seat Changes
The carrier will begin a A$400 million project to change seats and upgrade entertainment systems aboard its planes next year, it said last week. Qantas will reconfigure 29 aircraft, including Airbus SAS A380s and Boeing Co. 747-400 planes.
“It’s basic supply and demand,” according to Joyce, who said Feb. 18 that the business has turned. “As you get more demand for that capacity, it brings back pricing power for the airlines.”
Net income was A$58 million in the six months ended Dec. 31, the company said Feb. 18. That’s lower than the A$82 million median estimate in a Bloomberg survey of five analysts.
“I think the results were excellent considering the problems of the aviation industry globally,” Joyce said today. “The company is moving in the right direction. We are seeing yields improving. We are seeing performance improving.”