Correlation between upcoming election and soft demand.

Correlation between upcoming election and soft demand.

Can someone please explain how a possible early federal election is related to softening demand for flights as suggested by Qantas?

If anything, a more compliant upper house, without pesky cross benchers, would ensure an expedited government programme, that would boost business and consumer confidence. Is Qantas clutching at straws?

I think Qantas said they had no reason to explain for the soft demand, partly some due to the election cycle (which obv still has not been called)  but otherwise no reason as to why a 15% reduction in May demand.

Would be keen to read what various members think of their own, friends and colleagues travel plans for the coming months.  For me I won't be flying but will be on the train to Canberra, a relaxing and all round nicer journey than flying from KSA, especially as I'm not one to rush.

Result of matching VA capacity increases 2:1

That's not a factor, Southland, the 'capacity war' ended well over a year ago and Qantas has long ago seen the benefit of ending that 'war', it wouldn't suddenly drag down the market like this.

Mal agree but did they reduce the ASK a year ago or continue to add capacity. They are doing it now for international. Check the air services commisions website

Qantas cited soft demand due to lower consumer confidence overall and also ahead of a likely federal election, but I just can't see how the possibility of a federal election makes large numbers of people decide to fly less. Yes, the numbers indicate weaker demand overall, but I can't join those dots.

Precisely!

If you look at their remedial action - cutting down SYD/LAX and redirecting to HKG and SIN, it would seem the REAL reason for soft demand is the weaker AUD! 

Except that weren't the reduced SYD-LAX flights and additional HKG and SIN flights announced many many months ago, before this was an issue?

I am pretty sure the reduced SYD-LAX flights and increased HKG flights were announced last year, and was all tied up with the AA tie up on transpac.

You need to separate out what they said about domestic demand, and what the said about international demand.

On the domestic front, they have noticed some softness in forward bookings, and they rest is just trying to explain why that may have happened.

Those SYD/LAX reductions and redirecting to HKG /SIN was announced ages ago following AA commencing SYD/LAX. I appreciate it has been included statements now, but it was not announced in response to the current issue. 

Worth noting that the issues in the media appear to generally relate to domestic. Moving capacity around international markets is part of normal operations of an airline.

Finally, a weaker AUD (which seems to be having a mini fighthack) isn't necessarily bad for QF.

If you single out the Domestic market forecast, I would suggest that - overall - some 65-70% of bookings (as opposed to revenue) come from Y Class Red-eDeals. It is noticeable that the standard Red eDeal has risen significantly over the past 12 months. Some Red eDeals examples comparing main routes :

SYD-PER used to feature at $200 OW, now typically $250.

SYD-MEL used to feature at $95 OW, now typically $120

SYD-WGA used to feature at $75 OW, now typically $85

With housing stress, childcare costs, food etc all escalating, it is not surprising to me to see demand softening. Add to this, most of the above increases are well above 10%  - in a time where oil prices have come down significantly.

Perhaps it is time for QF to review it's pricing policy and rationalise fares ? .. rather than treating the mug punters as a constant cash cow. Was reading this morning that a 1% drop in RASK (Revenue per Available Seat Kilometre) at QF is projected to result in a drop of AUD $120m pre-tax profit accrding to Bloomberg.

It will also be interesting to see whether Virgin Australia reports a similar scenario in the next few days.

Given this was an annoucement to the ASX Qantas has to tell the truth.

But if their analytics capabilities are as good as they make out, including Loyalty, they should know exactly which group of travellers has pulled back and why. QF would also know which levers to pull to trigger the demand.

So perhaps QF is keeping mouth closed to avoid giving their competitors the insights?