Gemuser From Australia, joined Nov 2003, 5992 posts, RR: 6 Posted (7 years 9 months 2 weeks 3 days 12 hours ago) and read 3217 times:
With the release of QF annual profit figures today $A1,032 million, I was wandering around the QF web site and found this very intresting peice of info.
On 1/8/07 Geoff Dixon, CEO QF Group, addressed the National Australia Press Club. NPC addresses range from the earth shattering to the very boring, this one was in general boring except for this gem:
"Internationally we also face new levels of competition with Virgin next year coming on the Pacific, one of our most profitable routes, although I must say not as profitable as most commentators seem to think! Just for the record, the U.S./Australia route does not contribute 30 per cent of our profits, the figure is, in reality, less than 15 per cent."
So the Pacific routes contributed about $A155 million to QFs profit! At last some (reasonabley) hard data on an airline route profitability!!!
ClassicLover From Ireland, joined Mar 2004, 4753 posts, RR: 22
Reply 2, posted (7 years 9 months 2 weeks 3 days 8 hours ago) and read 3048 times:
Quoting Gemuser (Thread starter): So the Pacific routes contributed about $A155 million to QFs profit! At last some (reasonabley) hard data on an airline route profitability!!!
Not at all surprising... when people were bleating about the media reporting it was over 30% and being shocked and dismayed that SQ weren't allowed on the route, I was saying there was no way it was over 30%. It's good to have a hard number - less than 15% says to me somewhere between 10 and 15%. I wouldn't expect less than that, otherwise it would have been "less than 10%". QF have a lot of money invested in the service. QF have also stated in the past that it took a long time to build the route up to the profitability they have at the moment. This would be advertising, brand recognition, sponsoring Australia Week and all of that.
Now Virgin have stated that they will make a loss on the first year of the route and expect to make a profit on the second. Now this is an airline with a substantially lower cost base than QF - and they expect to make a loss out of the gates. Profitable doesn't necessarily mean anyone can stick a service on SYD-LAX and make money. After all, why don't NZ do it anymore if it's that much of a cash cow? It requires investment.
What I'd like to see is how much profit the route is giving to UA. Everyone said that PA was insane to sell the routes to UA back in 1985/6 because it made a lot of money for them. I'll place bets any day of the week on UA making a large profit on the Australia-USA routes as well. No-one ever mentions it though.
What we will see, in my opinion, is a lowering of QF prices across J and Y to compete with Virgin when they start flying the routes - but it will remain very profitable.
I do quite enjoy a spot of flying - more so when it's not in Economy!