Business

Qantas sees $122m carbon tax cost warns of fare rises

Qantas planes
Image caption The new carbon tax is the latest in a series of issues that have dogged the airline

Qantas Airways claims the new carbon tax is likely to increase the cost of its operations by as much as 115m Australian dollars ($122m; £76.7m).

However, the airline says the extra cost will be passed on to passengers as it increases fares.

Qantas expects the price on a single domestic flight to rise by about A$3.50 in 2013.

The Australian government has unveiled plans to impose a tax on carbon emissions in the country.

Prime Minister Julia Gillard said carbon dioxide emissions would be taxed at A$23 per tonne from 2012.

"In the context of the significant challenges facing the global aviation industry, the Qantas Group will be unable to absorb the additional costs associated with the carbon price and there will be a full pass-through to customers," the Australian airline said in a statement.

Meanwhile, Virgin Australia said the cost of the carbon tax to the company is likely to be about A$45m.

The carrier said it will also pass the extra costs on to the customers, with average domestic fares increasing by A$3 per ticket.

Added burden

Analysts said that while the company has said that it will pass on the additional costs to the consumers it still faces problems with rising fuel prices.

"Higher fuel prices will have much bigger impact on Qantas compared to carbon tax," said Greg Fraser of Fat Prophets.

"Qantas' fuel bill has been rising significantly," he added.

Mr Fraser said that unlike the carbon tax, Qantas has not been able to pass on the addition fuel costs to the passengers.

"They have tried to increase fares, but they have not been able to fully offset the fuel costs," he said.

Mr Fraser explained that due to increased competition both in the domestic and international market, Qantas has not been able to increase its fares substantially enough to make up for the increased fuel prices.

International operations

Australia's national airline also said that it is planning to restructure its international operations as a part of a new business strategy.

Alan Joyce, the chief executive of Qantas said that the carrier will focus on investment, partnerships, restructuring and exploiting the Asian market going forward.

The airline has been facing a variety of issues that have seen its international operations sink into the red for the past two years.

"The issue has been there for some time," Alan Joyce, the Irish boss of the Australian carrier candidly admitted.

"The international business has not been performing at the levels it needs to," Mr Joyce added.

Mr Joyce made the comments during an interview with the Australian Broadcasting Corporation.

He said that though the lacklustre performance of its international operations had been compensated for by the success of its budget subsidiary, Jetstar, as well as a frequent flyer programme, things need to change for Qantas to fare better.

"We don't believe that the solution is sustainable going forward," Alan Joyce said.

"We need to make significant changes to our international services as a consequence to the under-performance of the business today," he added.

Mr Joyce also said the company will take an "honest and aggressive" view on how its international operations are being run and will make cuts where they are needed.

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