Australia’s Qantas to suspend flights to Shanghai on low demand

Qantas Airways said on Tuesday it will suspend its Sydney flights to Shanghai from July 28, citing low demand, around nine months after the Australian flag carrier resumed the service on hopes of a travel rebound following the pandemic.

Aircraft on the Shanghai route will be redirected to fly other destinations across Asia experiencing higher demand or where there are new tourism opportunities, the company said.

“Since COVID, the demand for travel between Australia and China has not recovered as strongly as expected.

In some months, our flights to and from Shanghai have been operating around half-full,“ Qantas International CEO Sam Wallace said in a statement.

Qantas will continue to monitor the Australia-China market closely and look to return to Shanghai when demand has recovered, the carrier added.

The carrier announced a new route from Brisbane to Manila, which will begin late-October, additional flights to Singapore from October onwards.

It will also increase its flight frequency from Sydney to Bengaluru in India to daily from five per week for about four months starting mid-December.

Qantas Airways expanded its frequent flyer programme on Monday, offering access to 20 million more reward seats that can be purchased through points, as the Australian carrier plans to spend more on customers in a bid to fix its battered reputation.

The points required to book the airline’s new “Classic Plus” reward seats will be more than its existing “Classic” seats and will vary like normal air fares, meaning they will be lower during off-peak periods or when booking early.

The company had one of its most reputationally damaging years in 2023, as it defended a competition regulator lawsuit over selling tickets to already-cancelled flights and as a court found the airline sacked 1,700 ground staff illegally in 2020.

Qantas has since promised to focus more on customer benefits and engagement, and expects to invest A$120 million ($78.74 million) in fiscal 2025 for the new program.

It also expects the benefits from the program to outweigh the cost of investment in the first half of fiscal 2026. The carrier added it expects the Qantas Loyalty division to deliver underlying earnings before interests and taxes between A$500 million and A$525 million in FY24.

“On first pass, the change appears to be a modest negative short term including higher investment, lower margin and lower profit,” analysts at Citi wrote.

“In time, the hypothesis is this investment would stimulate volumes and earning activity that would outweigh costs, but mechanically would take time (18 months) to play out/prove up,” they added.

Qantas said its new reward seats will be available to be booked from Monday across international flights departing from Australia for travel from July 1, and will be available across its full international and domestic network by the end of this year.

The Australian flag carrier also confirmed it would begin a stock buyback of up to A$448 million, which it announced in February and expects to complete by June 30.

Australia’s Qantas Airways agreed to pay A$120 million ($79 million) to settle a regulator lawsuit over the sale of thousands of tickets on already cancelled flights, in an attempt to end a reputational crisis that has engulfed the airline.

The company will split A$20 million between more than 86,000 customers who booked tickets on the so-called “ghost flights” and pay a A$100 million fine instead of defending the lawsuit that it had previously vowed to fight, Qantas and the Australian Competition and Consumer Commission (ACCC) said on Monday.

The fine is the biggest ever for an Australian airline and among the largest globally in the sector, although some Australian banks and casino operators have faced higher penalties for breaches of the law.

“We recognise Qantas let down customers and fell short of our own standards,” CEO Vanessa Hudson said in a statement. The settlement “means we can compensate affected customers much sooner than if the case had continued in the Federal Court”, added Hudson, who started her role in September, noting the court still must sign off on the settlement.

If the court approves, the settlement will resolve a dispute that had featured prominently at a time when Qantas’s brand value tanked in consumer surveys amid a spike in complaints about cancellations. After the ACCC filed its lawsuit last August, Hudson’s longserving predecessor, Alan Joyce, brought forward his retirement.

“This penalty … will send a strong deterrence message to other companies,” ACCC Chair Gina Cass-Gottlieb said in a statement.

The payout, however, would pale against the A$1.47 billion net profit that analysts on average forecast Qantas to report in the year to end-June, according to LSEG data.

People who bought tickets on non-existent domestic flights would get A$225 and people with international fares would get A$450, on top of a refund, the airline and regulator said.

Qantas shares were trading 0.3% higher by mid-session, in line with the broader Australian market.

“We see today’s outcome as incremental positive, removing another post-COVID brand and valuation overhang from the stock,” RBC Capital Markets analyst Owen Birrell said in a client note.

Qantas is still waiting to learn how much it must pay nearly 1,700 ground handling staff it sacked in 2020 after a court found the job cuts were illegal since they were intended to stop industrial action.

The ACCC lawsuit centred on the months after Australia’s border reopened in 2022 following two years of COVID restrictions, and airline cancellations and lost luggage complaints spiked globally amid staffing shortages.

Qantas had argued that it faced similar challenges to airlines around the world, but the ACCC said its actions broke consumer law.

It had said the airline sometimes sold tickets to flights weeks after they were cancelled.

The ACCC’s Cass-Gottlieb noted that the settlement included a promise from Qantas not to repeat the conduct.

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