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In a submission to the Australian Competition and Consumer Commission, Qantas international boss Cam Wallace says the airline welcomed competition from more than 50 carriers, claiming it ultimately resulted in a better experience for customers. But for reasons that we may never fully understand, Qantas stands against competition from Qatar Airways.

In particular, Qantas objects to plans by its biggest domestic rival, Virgin Australia, to lease planes and crew from Qatar. Virgin and Qatar plan to use this arrangement to get more flights out of the country and into the Gulf – a key connection point for lucrative routes into Europe.

The ACCC is now reviewing the proposal, with its preliminary assessment due at the start of the year and a final decision in March.

Qantas, on the other hand, says the tie-up would undermine Australian wages. The airline claims Qatari crews are paid half what it pays Australians and that allowing Virgin to outsource indefinitely would be an affront to the same job, same pay legislation, which Qantas estimates will cost it $60 million a year. Virgin says the jobs created would not have existed any other way.

Virgin has asked the ACCC to allow the arrangement indefinitely, arguing that it would otherwise simply not return to flying long-haul routes because it doesn’t have the aircraft to do so. Qantas ordered 24 of those Boeing Dreamliner 787s and Airbus A350s last year for delivery in 2027.

And of course, Qantas also vehemently objected to Qatar expanding when it wanted to do it alone. Last July, it pushed back on a proposal to add the same 28 flights a week that Virgin has now asked to run using Qatar’s planes. Qantas objected on the basis that Qatar had planes available to relieve cripplingly high airfares straight away when its partner Emirates did not, claiming that would “distort” the international travel market.

Emirates pays its crews a similar wage to the Qataris. And it runs all of Qantas’ flights to Europe, Africa and the Middle East via Dubai. Qantas stopped flying its own planes via Dubai in 2018.

When Labor blocked Qatar’s expansion, Financial Services Minister Stephen Jones inadvertently let slip that driving prices down for consumers may not have been the federal government’s priority.

“We can drive prices down but if we drive them down to a level where it’s actually unsustainable to run an airline, instead of having two carriers we will design our markets in a way which will make it unsustainable for the existing Australian-based carrier,” he said in August.

Transport Minister Catherine King, explaining why Labor had blocked Qatar’s proposed expansion, put it another way. Qantas had made a big investment in new, more fuel-efficient planes, she said.

The crown jewel in that investment in planes is the Airbus A350-1000 ULR, which can fly non-stop from Sydney and Melbourne to London and New York. When the so-called Project Sunrise planes start operating to Europe in 2026, Qantas expects a $400 million increase in earnings.

But major Qantas investors still worry that the tie-up between Qatar and Virgin – and the big increase in capacity on flights to Europe – will be a threat to the airline’s most profitable route: Perth to London.

“In the context of the route, the impact will be large,” one investor, who asks for anonymity to speak more freely, says. That investor says that the single route is not “overly material” in the context of Qantas’ overall $2.5 billion profit. But it is substantial for Wallace’s international division.

“If you take Qantas’ international earnings and remove freight and the benefit of no dependency on A380s [which it plans to retire], the international flying business is only making $350 million to $400 million in total,” the investor says. “I think that is severely under-earning.”

In other words, while Qantas makes good profits from a dominant domestic business, its international division is not living up to its potential. Giving travellers more choice with Qatar flights could worsen that.

Other investors say Qantas disguises its true international margins in its Qantas loyalty division. Three-quarters of redemptions of frequent flyer points are made on international flights, and loyalty can buy flights to hand over as rewards at different, lower prices to customers.

Until now, most Australians flying on Qatar’s planes would input their Qantas frequent flyer details and earn Qantas status credits and points, given the two are both members of the Oneworld alliance.

The immediate risk posed by the Virgin-Qatar alliance is to the Qantas frequent flyer program’s dominance. Qantas Frequent Flyer earned 3.3 times more for each member than Virgin Australia Velocity in the year to June 30.

“Adding long-haul services to Virgin’s limited domestic and short-haul network will improve the appeal of its Velocity frequent flyer program and … close that gap with Qantas,” says Jarden’s Jakob Cakarnis.

And there is one problem with Qantas’ complaint about Virgin’s access to lower-cost crew through Qatar. Qantas uses staff based in the United Kingdom to fly into Australia and on flights to Singapore.

According to the Flight Attendants Association, they are paid about $20 an hour, compared to the $56 an hour those directly employed by the airline earn. Qantas hasn’t directly hired crew on those flights since 2008.

Qantas boss Vanessa Hudson has warned the federal government’s “same job, same pay” legislation poses a threat to the airline’s international arm and could push airfares on overseas routes higher.

On Thursday, after unveiling a $1.25 billion profit for the 2024 financial year, Hudson said while domestic airfares had come off previous highs, prices for overseas travel could go up as the competitive pressure on Qantas ramps up.

Qantas competes with 55 airlines internationally and has higher costs than the bulk of them, according to Hudson.

“Our international segment faces the greatest competition. It is the most exposed to external shocks such as geopolitical events and how they flow into fuel prices. Our cabin crew were already the highest paid in the country and after this legislation they will be paid triple what our Middle Eastern and Asian competitors pay.”

Qantas on Thursday said it had reached an agreement with the Flight Attendants’ Association of Australia (FAAA) to give pay rises to its short and long-haul cabin crews following the December legislation, which will cost the business an additional $60 million over the next financial year.

“Adding costs to any airline business will result in ongoing pressure on airfares, whether those costs are from same job, same pay or higher fuel prices, ultimately that will influence pricing,” Hudson said.

The Transport Workers Union (TWU) has also submitted applications on behalf of Jetstar, while the FAAA has three more claims yet to be worked through. Qantas has not factored this into its 2025 provision.

“We have to maintain a certain level of profitability because that’s core to us being able to renew the fleet and at the heart of what is good for customers and our people. It’s important for us to get that balance right,” she said.

The head of the FAAA, Teri O’Toole, said the agreement showed Qantas’ management had changed for the better, and it struck the right balance between business security and the necessary pay increases for its cabin crew.

“This is a far cry from the Qantas of just a couple of years ago, which declared open war against their cabin crew employees and held a gun to the heads of workers with applications to terminate their Enterprise Agreement,” O’Toole said.

The latest result, Hudson’s first as Qantas’ chief executive, was 28 per cent lower than 2023’s record $1.73 billion profit that kicked off a gruelling time for the battered business as customers, shareholders and staff rallied against the once-beloved brand amid widespread frustration about its customer service and fares.

Hudson said the company has been focused on restoring the brand after a torrid end to 2023, which culminated with Joyce’s departure, the loss of a High Court appeal after it illegally sacked 1700 workers, and Federal Court action following a court case lodged by the consumer watchdog.

Hudson, who has managed to resolve the bulk of the issues which plagued Qantas when she first took over in September, added that she was focused on ensuring strong operational performance, deepening the airline’s relationship with staff, unions and airports, and keeping a lid on costs.

“For me, this next year is going to be about consistency. We have to maintain a level of profitability and discipline around cost and our balance sheet strength because that’s what sustains us through the cycle of fleet renewal. Sustainability is the other focus, it’s the biggest challenge aviation has over the next decade,” she said.

Qantas’ results follow the release this week of the government’s long-awaited aviation white paper, which recommended 56 reforms for governing the sector until 2050, including a passenger charter of rights.

Qantas missed the bulk of its financial targets this year, including Qantas domestic and international, due to having to fork out $230 million in customer restoration initiatives and provisions for penalties following a settled court case with the consumer watchdog and a looming compensation penalty following the illegal sacking of 1700 ground handlers.

Its overall revenue jumped 10.7 per cent to $21.9 billion. Its operating margin fell to 10 per cent, down from 13.5 per cent in 2023.

Qantas International had been aiming for an 8 per cent earnings before interest and taxes (EBIT) margin and instead came in at 6.4 per cent, citing the return of global airline capacity and lower freight yields. Qantas and Jetstar’s combined domestic arms achieved a 14 per cent EBIT margin, falling short of its 18 per cent target.

Jetstar delivered record earnings of $497 million, but still missed analyst expectations of up to $585 million, while its loyalty division came in at $511 million, within forecasts.

Despite the missed targets, Qantas has announced a $400 million on-market share buyback and flagged it would likely return to fully franked dividends in the second half of this financial year. Hudson said she remained committed to the airline’s margin targets despite 2024’s performance.

Its net result was impacted by $198 million in legal provisions, including $128 million to settle the airline’s court case with the consumer watchdog and a $70 million increase to provide for its illegal sacking of ground handlers.

Jefferies analyst Anthony Moulder said the result was within expectations and the outlook was positive despite anticipating additional costs in 2025.

“The higher buyback level and the signal to return to fully franked dividends [in the second half of the 2025 financial year] highlights management’s confidence in the balance sheet with ongoing strength in cash flows supporting the high capital expenditure levels,” he told clients.

Qantas has copped a 28 per cent drop in net profit in order to rebuild its battered reputation, with the lower result attributed to cheaper airfares and increased spending on customer and fleet.

The underlying before tax profit of $2.08bn was described by CEO Vanessa Hudson as “getting the balance right” after the previous year’s record $2.47bn gain was achieved by high fares and brutal cost cutting under her predecessor Alan Joyce.

Statutory net profit fell to $1.25bn from $1.74bn, and included the impact of Qantas’ $128m settlement with the consumer watchdog over the sale of tickets on cancelled flights.

Ms Hudson said the focus on customers would continue in line with her ambition to “restore trust and pride in the airline”.

In the year to June 30, Qantas splashed out $230m on “customer initiatives” focused on better food and beverage, on time performance, lounge facilities and an improved app.

Qantas’ “reputation score” suggested they were on the right track, lifting 12 points in the year to June 30, and a further 4 points in July to 67 out of 100.

Although that still seemed quite low, Ms Hudson said it was within 13 points of their highest reputation score of 80 when Qantas was the most trusted brand in Australia.

“They say actual reputation takes three years to rebuild because you go through cycles across the journey, so we’re in it for the long haul,” she told The Australian.

“We know that consistency of delivery will be a really big part of that.”

As well as lifting on-time performance and empowering cabin crew to recover bad situations more quickly, customers had benefited from an 8 per cent fall in domestic fares, and 10 per cent drop in international in the last year.

But Ms Hudson was not convinced lower airfares were that important to their customers.

“I can’t say one way or another whether lower fares make people feel happier about Qantas, I don’t think it’s the biggest driver,” she said.

“I think it’s about the way they feel when they’re in our care, the way we look after them, the way our people show up, and the way we step up when things don’t go to plan — like serving as the national carrier to repatriate Australians in need and stepping up to support Bonza and Rex customers.

“There’s a whole lot of elements that go into reputation because it’s a feeling, it’s about how they feel about the business.”

In the year ahead, Qantas planned significantly more international flying as the last two A380s returned to the fleet, lifting capacity to above pre-Covid levels for the first time since the pandemic.

Ms Hudson said the extra seats would go on existing and new routes, with Qantas believed to be weighing up the business case for flights to Chicago, Seattle and Athens.

Despite continuing cost-of-living challenges, travel demand was “stable” and Ms Hudson hoped the long-awaited rollout of Wi-Fi on international flights would please customers.

“We are seeing an increase in customers even in the current difficult times, prioritising their holiday over other discretionary items of expenditure,” she said.

“For us that provides a really optimistic outlook for the 2025 financial year.”

There was no shortage of headwinds, one of the biggest of which was a new deal with long haul cabin crew that meant the cost of flight attendants would be triple that of Qantas’ international competitors.

Taking effect from November 1, the deal allowed cabin crew contracted from labour hire firms to move onto Qantas agreements, driving up wages as much as 30 per cent.

Ms Hudson said it was a necessary move and Qantas would seek to offset the additional cost in other ways.

“We had a disadvantage to start with, (cabin crew cost) was about double that of our competitors now it’s going to be triple,” said Ms Hudson.

“It will put more pressure on fares in the short term, but we’re going to look at every aspect of the business to ensure we maintain international competitiveness.”

New, more fuel efficient aircraft would help with the transformation and Qantas expected to take delivery of 20 new planes by mid-2025 including the first A321XLR from April.

Boasting 20 business class seats, and 180 in economy, the A321 was intended to replace ageing Boeing 737s on high traffic domestic routes and operate short haul overseas flights.

The post-Alan Joyce era profit was generally well received by analysts, who noted the result was largely in line with expectations.

Despite lower operating margins for Qantas Domestic and International, the segments were the most profitable parts of the group, with earnings before tax of $1bn and $556m respectively.

Jetstar achieved a record result of $497m, up from $404m, and increased its operating margin from 9.5 per cent to 10.1 per cent.

Qantas Loyalty also continued to expand with frequent flyer membership growing from 15.2 million to 16.4 million and 300,000 new points-earning credit cards acquired in the year to June 30, up 21 per cent on the previous year.

Shares in Qantas closed up 0.8 per cent on Thursday at $6.37, in a slightly lower market.

Demand for sustainable aviation fuel could outpace supply by 2030 without a significant increase in capacity. Forward-leaning aviation players use a combination of strategies to source SAF, including equity investments, to help scale the ecosystem.

irlines around the world are committing to ambitious decarbonization goals to reach the industry target of net-zero emissions by 2050. Among potential decarbonization measures, sustainable aviation fuel (SAF) will make the biggest contributions—up to 50 percent of abatement, depending on the airline.¹ Sustainable fuels, which are already certified for use in today’s jet engines, produce about 80 percent less greenhouse gas emissions than fossil kerosene.²

The SAF industry is still in its infancy: in 2024, production capacity will not exceed 1.5 million metric tons (Mt),³ barely 0.5 percent of total jet fuel needs, according to International Air Transport Association estimates.⁴ We expect demand to rise, however, due to regulation and voluntary airline commitments. The estimated global demand from mandated SAF is around 4.5 million Mt in 2030. Considering mandated and target demand, this number increases by 2 million Mt from Asia and 10 million Mt from North America to a total of 16 million Mt or more. Airlines have voluntarily pledged to use even more: announcements of the largest airlines would accumulate to more than 20 million Mt in 2030.⁵

SAF policies are key for supporting market growth, of which mandates are relatively certain because of penalties for noncompliance. But in an industry known for volatility, intense global competition, and slim margins, some airlines might miss their voluntary decarbonization targets if SAF remains expensive and in short supply—for example, SAF currently costs around 3 times more than fossil fuel kerosene.

With jet fuel historically accounting for 20 to 30 percent of operational costs,⁷ airlines voluntarily adopting SAF blend-rate targets of 10 percent by 2030 would need to pass on 4 to 6 percent of total cost increases to customers via green premiums, depending on where airlines are based on and what support mechanisms are in place. Lufthansa Group, for example, introduced an environmental cost surcharge in June 2024, applying it to all departures from EU-27 countries.⁸

On the supply side, progress is under way around the world: energy majors, airlines, start-ups, and scale-ups are pursuing more than 200 SAF production projects. Some are operational, while others are in development, waiting for final investment decisions (FIDs). Taking into account all announced facilities, we estimate that annual global SAF production capacity would approach 11 million to 25 million Mt by 2030, but those supplies come with significant uncertainty. Not all announced projects will materialize, for example. Expanding production beyond the use of waste oils will require scaling up new and immature technologies, while relatively high interest rates and risk premiums could discourage investment, especially in immature technologies such as synthetic fuels. Since 2022, announced production capacity expected to be operational by 2030 has increased significantly, while capacity that was expected to become operational in the near future has been delayed (Exhibit 1).

To map development until 2030, we considered different scenarios of demand and supply, including an expected adherence rate for airlines. The result shows that the future is highly uncertain and that SAF demand could outpace supply if mandated and targeted demand materializes, unless there is a significant increase in additional production volume (Exhibit 2).

In exchanges with chief sustainability officers across the industry, we learned that about two-thirds expect a shortage by 2030, while a third are uncertain or do not expect a shortage (Exhibit 3). Participants unanimously agreed that regulatory interventions are the primary motivator to buy SAF, followed by companies’ own voluntary targets.

Airlines can use a range of procurement strategies to manage uncertainty and access to SAF

Scaling SAF requires significant funding, from venture capital (VC) to infrastructure investment for building SAF facilities. Investors, however, are hesitant because of uncertainty around future demand and technology readiness. Aviation stakeholders can play a key role by helping create momentum for the further expansion of SAF production capacity.

Theye Veen, chief commercial officer at SkyNRG, a Dutch SAF player active across the value chain, explains that “every innovation needs this ‘explosive money’—venture capital. Just $100 million to $200 million could accelerate four to eight pre-final-investment-decision projects, marking a substantial step forward in sustainable aviation.”⁹

Apart from airlines that are counting on a future SAF spot market and plan to “wait and see,” forward-leaning aviation players are using a range of strategies to source SAF, from pure offtake agreements to equity investments in suppliers or production (Exhibit 4).

Industry action follows four main archetypes:

• Individual offtake agreements. Individual offtake agreements are the predominant approach to SAF procurement; most airline leaders tell us they intend to use such agreements. For mature airlines, direct procurement is similar to today’s process for procuring airline jet fuel. Although the required up-front capital is minimal, offtakes can create balance sheet risks. The recent 980-million-liter deal between IAG International Airlines Group and Twelve exemplifies the industry’s readiness for substantial agreements.¹⁰ A long-term “bankable” offtake agreement with an anchor customer, such as Southwest Airlines’ 20-year arrangement with USA BioEnergy,¹¹ can mitigate risk and help suppliers attract investors. That said, long-term offtake agreements can pose financial risks, especially since the SAF industry is in its infancy and few suppliers have proven track records.
• Partnerships and consortiums. Partnerships and consortiums such as the Sustainable Aviation Buyers Alliance (SABA) illustrate how industry stakeholders can collaborate to pool demand or create other synergies. This option is comparable to offtake agreements of individual airlines but involves multiple stakeholders, sometimes including end customers such as corporations seeking to decarbonize their air travel. SABA’s April 2024 announcement involves offtake agreements with four fuel providers, three airlines, and 20 corporate aviation customers, including McKinsey.¹²
• Direct investments. Direct investments of individual airlines into suppliers or selected projects are another option. Norwegian Airlines and Cargolux, for example, invested in Norsk e-Fuel’s power-to-liquid plant in Norway.¹³ In January 2024, LanzaJet Freedom Pines Fuels opened the world’s first ethanol-to-SAF production facility with investments from multiple stakeholders, including IAG and All Nippon Airways.¹⁴ Many of these investments are bundled with offtake agreements with lower SAF-sourcing costs and preferred access to future supplies. Another novel direct-investment approach is the strategic partnership of Airbus and Qantas, which are co-investing $200 million in SAF production projects to foster a local SAF ecosystem in Australia. The companies are blending their expertise in the global SAF market from both OEM and airline perspectives, and combining their knowledge of the Australian market.¹⁵
• SAF funds. SAF funds are typically set up by partners with a common interest in scaling production. Potential partners include investors and financiers, scaled players in the SAF supply chain, other airlines and airports, engine and aircraft manufacturers, and corporate customers seeking to mitigate Scope 3 emissions. Partners investing together can raise more funds and impact by enabling larger ticket sizes. Given their typical size of less than €0.5 billion, SAF funds initiated by the aviation sector will be able to provide the first rounds of financing to promising projects.

Such a setup unlocks a number of benefits: a synergistic consortium of investors provides the portfolio company with expertise and support along the value chain, and the fund structure mitigates risks for each participant while maximizing the overall investment budget. Some investors may seek carbon credits for offtakes generated by the SAF that is produced and sold. Co-investors, such as other airlines, can also secure more-flexible terms and lower prices.

The first offtaker can guarantee a significant base volume at an attractive price in a cost-plus model and has a lot of flexibility in the contract.

Former executive at an operator in the cargo industry

For example, United Airlines’ investment vehicle—known as the Sustainable Flight Fund—has grown quickly since launching in February 2023.¹⁶ More than $200 million is now committed with more than 20 corporate partners, including Air Canada, Boeing, Embraer, GE Aerospace, Honeywell, and JPMorgan Chase.¹⁷ The fund’s dual mission is to secure a consistent supply of SAF and expand the overall SAF supply chain, thereby accelerating research, development, and production. Since its inception, the fund has invested in Svante, a carbon capture company, and Dimensional Energy, a company that can make low-carbon products from CO₂ and hydrogen.

Scott Kirby, CEO of United Airlines, put it plainly: the challenge “is not that supply is limited,” he says; “the issue is creating supply. The reason we have double the commitment of anyone else is that we have helped build companies that are creating [SAF]. The only way to get SAF is to fund and build the companies that are creating SAF. It is not an option to just go there and buy it.”¹⁸

Orchestrating funds and managing investments are not among the core competencies of most airlines, but advanced instruments can provide advantages. On the capital allocation side, funds can reduce risk through diversification compared to direct investment, but airlines can find it difficult to secure capital, especially in times of financial uncertainty without the promise of immediate returns.

Leading sustainability funds have discipline and skills in sourcing deals; assessing risks and opportunities based on deep expertise in SAF pathways, economics, and production technologies; driving portfolio strategy; managing funds; and convening a wide range of investment partners in early stages. Few airlines or OEMs have these capabilities in-house at the required scale, and building them could require significant expense and efforts that could distract teams and leaders from their core roles.

Best practices based on research and experience

In recent years, SAF funds have emerged as a new category of sustainability-related investment vehicles in aviation. They can take different shapes and forms; for example, they can be independent entities such as VC funds or, closer to airlines, corporate venture capital funds (CVCs).

A typical CVC managed by a corporate holding company aims to drive innovation in a legacy organization. The CVC JetBlue Ventures, for example, is investing in early-stage start-ups improving travel and hospitality, “next-gen aviation operations and enterprise tech,” “seamless customer journeys,” and “sustainable travel.”¹⁹ JetBlue Ventures is a proprietary JetBlue investment vehicle, while United Airlines’ Sustainable Flight Fund includes a broad set of investment partners, but both are incorporated as CVCs.

SAF funds also differ from broader environmental, social, and governance funds, which typically have wide-ranging mandates and partners from a range of industries. KLM’s investment in SHIFT Invest, for example, includes partners in transportation, infrastructure, and finance that are investing in a broad agenda of climate and biodiversity. The airline contributes its name but otherwise acts as a hands-off investor.²⁰

Based on our research and experience serving clients in aviation, investment, and other industries, we’ve identified three best practices in designing and setting up SAF funds.

1. Set clear investment objectives and targets

Management teams are more effective when they’re aligned on what success looks like. For example, getting access to sustainable fuel isn’t the only reason why airlines drive such funds. Airlines typically also aim to build internal capabilities and demonstrate their commitment to sustainability to the public, including customers, legislators, and regulators. Leaders within the airline need to be in alignment, of course, but the entire consortium of stakeholders and potential target companies should also agree on overarching goals and success metrics. These companies need to understand the extent to which the consortium supports and accelerates the business. Management teams can help improve clarity and drive alignment by making early decisions on objectives, expectations, and governance. A well-designed decision grid can guide their choices (Exhibit 5).

Although most aviation players consider the fund to be strategic, they do negotiate hard-to-get financial benefits from them. Some even have clear IRR targets—often around market rates of around 12 to 16 percent—and want general partner status and board seats where they believe their expertise can help advance projects.

2. Engage the right partners to enable synergies and support for portfolio companies

Although some funds are set up by a single company, working across a consortium of partners can provide synergistic benefits beyond scale—such as uniting stakeholders throughout the ecosystem, raising awareness and impact, and allowing partners to jointly advocate for supporting policies.

Some funds bring in partners from across the aviation value chain, including airlines, corporate customers, financiers, OEMs, travel management companies, and airports. Ultimately, the fund should create “pull” from the SAF supplier side, seeking an environment of supportive investors who can enable their effective incubation.

From the start-up perspective, a financial institution might seem to be a more attractive partner than an airline, which may not be able to provide cash as quickly with minimal interference. But airlines can significantly boost a portfolio company’s attractiveness with its name, network, industry insights, and attention from the public and other investors. A collaboration like this can include detailed data exchanges and close cooperation; for example, research teams from the portfolio company can work with operational teams from the airline to gain insights into operational efficiencies to benefit the start-up and investors.

3. Shape governance to move quickly, focus on returns, and involve experts

In a fund incorporated as a CVC, the investment committee typically includes aviation company leadership, and, in some cases, representatives of investment partners. Since these funds compete against faster-moving VC funds that have more flexibility and less overhead, they need an effective independent governance structure that allows for quick decisions. The corporate governance, legal, and procurement processes of airlines may not permit the speed of decision making that VC investments require; an airline may require a three-year profit and loss statement, for example, which new start-ups typically lack.

Best practices for these funds, therefore, include establishing a governance structure similar to those of independent VCs, with independent investment decision making within the agreed mandate of the fund. This independence can speed execution, but it can also create tension with the airline organization—for example, when a sustainability team is the “center of expertise” of SAF.

In addition to the choices outlined in Exhibit 5, some funds seek to attract the right talent by implementing performance-based compensation models and management fees, which differ significantly from traditional airline-employee remuneration.

Next steps

Advances are being made in the science and industry of SAF production—but not quickly enough for the aviation industry to meet its ambitious decarbonization goals. As more aviation players start to catalyze the ecosystem through investments in the SAF supply chain, even more capital is needed to meet global demand in the next decades. Beyond the first seed investments to accelerate start-ups and immature projects, trillions of dollars for post-FID capital will be required to build enough capacity to meet global demand by 2050.²¹

Long-term infrastructure investors may need to step in and finance capacity development. This is likely the next challenge for the sector, as demand is uncertain and technology unproven. To reduce this risk, the regulatory environment can be key, particularly when globally coordinated.

In short, beyond fuel and energy suppliers, a wide range of industry stakeholders will need to play much larger roles in expanding and strengthening the SAF ecosystem to help the world reach its climate targets. An airline’s SAF fund can drive innovation, but other investors will need to step up to fund the infrastructure that will decarbonize the industry.

Prime Minister Anthony Albanese said the federal government would “examine any proposals” that were presented to secure the future of regional carrier Rex Airlines, with the company’s shares currently in a trading halt.

Rex’s shares were suspended from trade on Monday, pending a further announcement that will be released by Wednesday. The airline had stopped selling tickets on some of its capital city routes on Tuesday.

“We are concerned about Rex,” Albanese said at a press conference. “It’s an important regional airline. What we will do, though, is examine any proposals. Rex receives substantial government support with no conditions.”

Albanese’s comments indicated that if there was to be any future government support of Rex, it would have conditions.

Airlines received taxpayer funded bailouts throughout the pandemic from the Morrison government. However, a criticism of that financial support was that the Morrison government didn’t attach any conditions to it, compared to other nations, such as the New Zealand government.

During the pandemic, the New Zealand government provided a financial bailout to Air New Zealand, and in return, it received a substantial shareholding in that airline.

In his remarks, Albanese also criticised Rex for moving away from its core role of servicing regional Australia to competing on the cut-throat Sydney and Melbourne route.

There was speculation that EY Australia would be appointed as administrator to review the financial health of the airline, the nation’s third largest. However, an EY spokesperson declined to confirm that speculation and Rex Airlines’ spokesperson also declined to comment. Rex’s chairman John Sharp, a former transport minister in the Howard government, did not return calls.

Rex has been an important carrier in Australia’s aviation market providing links with regional communities and their economies into capital cities, and also servicing the fly-in, fly-out markets to mining centres. “We want to see the aviation industry in Australia continue to be one that provides those services and that access,” Albanese said.

Rex flies to 56 destinations, including between the highly competitive markets of Sydney, Melbourne and Brisbane. In June, it began offering one-way fares as low as $99 between Melbourne and Perth in an effort to steal market share from its bigger rivals Qantas and Virgin.

Ian Myles, a veteran transport analyst with Macquarie said a number of airlines over several decades have tried to compete on the larger routes between major capital cities and have failed, such as Compass Airlines.

“It’s really difficult to break into that market. You have got to have lots of money to go into those big routes,” Myles said.

However, he noted that it might be more cost-effective for a regional airline in the future to potentially fly into the Western Sydney Airport when it opens in 2026, where it could secure better slots.

A slot is an agreement between an airport operator and an airline that allows the airline to operate take-offs and landings at a specific time and date. Smaller airlines have struggled to compete against Qantas and Virgin for slots at Sydney Airport, and more broadly in the market.

The challenges in the aviation market were evident earlier this year, when budget carrier Bonza airlines, collapsed.

On Tuesday, Federal Transport Minister Catherine King said the government was in touch with Rex Airlines. She said she didn’t want to see Rex fold, but it was important for the airline to keep its customers informed as to what’s happening.

“We’re keeping a pretty close eye on the announcement tomorrow and stand ready. You know, we think Rex is a pretty important part of the Australian aviation industry and stand ready to work with them to see whether there’s any assistance or anything the Government needs to do,” she told the ABC. “We don’t want to see Rex fold.”

Rex also owns air freight, aero medical and charter operator Pel-Air Aviation, the Australian Airline Pilot Academy in Wagga Wagga and Ballarat and also a propeller maintenance organisation. Additionally, it has a 50 per cent stake in National Jet Express, which is a fly-in-fly-out charter and freight operator.

The Transport Workers’ Union on Tuesday said the federal government must ensure that Rex is not allowed to go the way of Bonza, with around 2000 jobs potentially at risk.

“We are of the view that we cannot let Rex fail,” the union’s national secretary Michael Kaine told ABC Radio National on Tuesday

“Rex has carved out an existence despite the massive commercial and competitive dominance of Qantas, and we might be seeing here once again the pressure of that dominance is squeezing Rex out, and we hope that is not the case.”

The federal government is due to release its Aviation White Paper shortly, which examines issues in the sector, including its competitiveness and financial health. It will be used to shape future federal government policy for the industry.

Rex’s shares have fallen by more than one third this year. The airline has narrowed its losses since the pandemic hit, which roiled airlines globally.

In its first yearly half results, released in February this year, Rex increased its total revenue by 4.6 per cent. It reported a half-year loss of $3.2 million, which shrank from a loss of $16.5 million in the previous corresponding period.

The airline has also recently had to contend with a boardroom brawl. In early June, the company revealed that Lim Kim Hai, who owns almost 17 per cent of Rex, was removed as its executive chairman, a role that he had held for 21 years. He remained on the board as a director.

Neville Howell, who was the company’s chief operating officer, was appointed as chief executive for two years, and John Sharp was elevated to chairman from deputy chairman.

The company did not explain the reason for Lim’s removal.

Five weeks after those changes, Lim, as a major shareholder, requisitioned a shareholder meeting to remove four Rex directors, including Sharp. In their place, Lim proposed appointing Lim Kang Song and Mukul Soul as directors.

The company said it would update the market on that boardroom tussle, but there has not been any notification apart from the trading halt.

Rex Airlines’ future is up in the air as the company grapples with boardroom turmoil, a stoush with its biggest shareholder, and speculation that restructuring experts Deloitte have been appointed to the group.

Rex, the nation’s third-largest airline, sought a trading halt in its shares until Wednesday, after The Australian reported that Deloitte restructuring partners Sal Algeri and Richard Hughes, who worked on Virgin Australia’s administration, had been appointed to the company.

Prime Minister Anthony Albanese on Monday said the federal government was seeking information from Rex on its financial situation and will keep a close eye on the situation as it unfolds.

“I’m very hopeful that they’ll see their way through,” he told ABC Afternoon Briefing. “We have sought information from the airline through Minister Catherine King, who came to see me about this today. And through the department we will continue to monitor what happens there.”

Rex flies to 56 destinations, including between the cut-throat markets of Sydney, Melbourne and Brisbane. In June, it began offering one-way fares as low as $99 between Melbourne and Perth in an effort to steal market share from its bigger rivals Qantas and Virgin.

The airline also owns air freight, aero medical and charter operator Pel-Air Aviation, the Australian Airline Pilot Academy in Wagga Wagga and Ballarat and also a propeller maintenance organisation. Additionally, it has a 50 per cent stake in National Jet Express, which is a fly-in-fly-out charter and freight operator.

Earlier this year, Rex had announced it was partnering with Etihad, which enabled Rex’s domestic flights to connect with the Middle East operator’s global network.

Rex has been narrowing its losses since the pandemic hit, which roiled airlines globally. In its first half results, released in February this year, Rex grew its total revenue 4.6 per cent. It reported a half-year loss of $3.2 million, which had narrowed from a loss of $16.5 million in the previous corresponding period.

Rex, formerly known as Regional Express, was contacted but in a statement a spokesperson said it wasn’t appropriate for them to make any comment.

Opposition transport spokeswoman Bridget McKenzie accused Transport Minister Catherine King of dithering over reforms to aviation, perpetuating a lack of competition in the sector.

“It is time this government pulled its head out of the sand and starts pulling on the levers to foster more competition, better reliability and more affordable airfares in Australia,” she said in a statement.

“Two aviation companies control more than 93 per cent of the domestic space and companies like Rex create more competition which means cheaper airfares across the board.”

The Transport Workers’ Union said Rex’s trading halt illustrated the need for a commission to oversee aviation.

“We know healthy competition is the only remedy for an industry in crisis,” the union’s national secretary Michael Kaine said.

In early June, the company issued a statement that Neville Howell, who was the company’s chief operating officer, had been appointed as chief executive for two years, and that John Sharp had been elevated to chairman from deputy chairman. Howell was previously a board director but had stepped down in March.

In that same statement, it was revealed that Lim Kim Hai, who owns almost 17 per cent of Rex, was removed as its executive chairman - a role that he had held for 21 years. He remained on the board as a director.

The company did not explain the reason for Lim’s removal.

Five weeks later, Lim, as a major shareholder, requisitioned a shareholder meeting to remove four Rex directors, including Sharp. In their place, Lim proposed appointing Lim Kang Song and Mukul Soul as directors.

The company said it would update the market on that boardroom brawl, but there has not been any notification apart from the trading halt. Another director Sid Khotkar had resigned from the company in April.

Sharp, a former transport minister in the Howard government, was contacted for comment.

Australians have decided that holidays are non-negotiable, despite cost-of-living pressures, with travel rates on the rise.

Recent polling shows that trips are getting shorter since the Easter break as financial pressures grow, but the frequency of holidaying was still on the rise: 74 per cent of Australians are travelling this winter, an increase since autumn’s 70 per cent.

This school holidays, travel has become the No 1 non-essential spending priority, according to the Tourism and Transport Forum.

Some 23 per cent of those surveyed said it was their highest priority beyond essentials, followed by personal care and make-up at 19 per cent and gifts for others at 14 per cent.

The national survey of 1500 participants indicated 34 per cent were holidaying near home, 26 per cent would cross borders, and 14 per cent were going overseas this winter.

The international contingent marks a significant rise from the 8 per cent travelling overseas in autumn, as many Aussies chase the northern hemisphere’s ­summer.

The top destination is Europe followed by New Zealand, then Japan, the US, Indonesia, Vietnam and Thailand.

TTF chief Margy Osmond said more Australians were visiting local cultural sites, a sector she argued needed greater government funding. “The pandemic was an extraordinarily difficult time for the tourism industry. But if there’s one outcome from it, that I think is proving a real boon for the tourism industry,” Ms Osmond said.

“People are determined not to be locked down or locked away, and the independence and the capacity to get away that a holiday represents has now become everybody’s No 1 priority.

“People have got a different kind of view of their own country now. They’re seeing more opportunities and options in terms of holidaying in Australia than they have before.”

Financial stresses are still the greatest barrier to travel, and increasingly becoming more of an impediment.

In the previous quarter, 53 per cent of Australians had travel plans impacted by financial pressures. That has now reached 56 per cent.

From that portion, almost a quarter of people cut plans short to save costs. Most people going away this winter will not spend more than $5000 or be away for more than a week.

Despite this, animals are increasingly likely to travel with their owners. The latest polling indicates that one in six families intends to take pets with them on holiday, and just as many intend to leave their furry friends in special pet accommodation.

“What used to happen is that after people met their expenses … a little retail luxury was the thing that they were most likely to get for themselves,” Ms Osmond said.

“Now it’s a holiday, and they’re absolutely … determined nobody’s going to stop them getting away.”

Local holidayers will bring a tourist influx to NSW, followed in popularity by Queensland, Victoria and WA. The top three cities: Sydney, Melbourne, Brisbane.

Regional highlights are the Gold Coast, then Sunshine Coast, the Great Ocean Road, the Mornington Peninsula and NSW Far North Coast.

“People are holidaying in their own state; they’re discovering a whole lot of things that they might not have done before,” Ms Osmond said.

International tourist numbers are close to recovering to pre-pandemic levels and visitors are splashing more money, with the average spend increasing by 25 per cent compared with 2019.

Tourism and Trade Minister Don Farrell said the latest Tourism Research Australia data, to be released on Wednesday morning, showed improvement across the board in spend, trips and nights stayed compared with pre-COVID-19 levels.

“There is more good news for Australian tourism businesses and the hundreds of thousands of people it employs, with new data showing international tourism is climbing back to pre-pandemic levels, with more international visitors returning to our shores, staying for longer and spending more,” Senator Farrell said.

The average nights of stay was up from 32 in 2019 to 37 in the March 2024 quarter, with international visitors staying for a total of 87.5 million nights, or 105 per cent of pre-pandemic levels.

International visitor spend reached 99 per cent of pre-pandemic levels, injecting $10.2 billion into the Australian economy. Trip numbers reached 89 per cent of pre-pandemic levels, up from 81 per cent in the previous quarter.

But the numbers remain sharply below those experienced by Europe and the United States, where arrivals had rebounded to 94 per cent and 90 per cent by the end of 2023, according to the United Nations Tourism data.

The inbound tourist industry has remained hamstrung by stubbornly high air fares, but Flight Centre said last month that fares were now finally starting to fall from all regions, including Europe.

“New Zealand, China, the United States, the United Kingdom, and India are currently Australia’s top five international tourism markets, and we are working hard to encourage more and more visitors from right around the world to book a holiday to come and see Australia,” Senator Farrell said.

“Domestic tourism remained stable in the March 2024 quarter, and it’s great to see Australians continuing to explore their own backyard, supporting local businesses and the economy.”

The figures singled out the fastest-growing Vietnamese passenger market, as low-cost carrier Vietjet ramps up flights in and out of Australia, as part of the government’s strategy for closer engagement with South-East Asia and to help tourism operators target this market.

Senator Farrell said the government was committed to attracting more “high-value” travellers from the region, with Vietnamese travellers injecting $829 million of the total spending.

Chinese visitors spent $7.2 billion in the March quarter, followed by the US and New Zealand with $2.1 billion, the UK at $2 billion and Indian visitors with $1.5 billion. All spending except for that from Chinese visitors exceeded pre-pandemic levels.

Transport Minister Catherine King has been asked to reconsider a bid for Qatar Airways to add more flights to Australia, which would help boost inbound travel from Europe. Senator Farrell’s office declined to answer whether it supported the bid, deferring to Ms King.

But he said 2024 was on track to be the best year yet for tourism operators.

“Tourism is an important part of our economy, supporting hundreds of thousands of businesses and jobs across Australia, a figure which is only expected to grow with the World Travel and Tourism Council predicting that travel and tourism will contribute more to Australia’s economy in 2024 than any previous year on record,” he said.

In recent years, there has been a distinct decline in travel retail. Duty-free is no longer alluring when domestic and international e-commerce options are so convenient and competitive. 

Covid-19, understandably, caused a huge downward spike for the wider industry (about 70 per cent). And while revenues and traffic are recovering, the industry isn’t expected to return to pre-Covid levels until next year.

There’s a huge opportunity to be tapped. Experiences in travel retail are traditionally more interesting than in land-side channels. 

Brands often have more power than retail in these environments and, as a result, can bring their A-game to their experiences. 

Viewed through a retail lens, there are some interesting challenges and observations.

The retail travel contradiction

Firstly, travel retail suffers from the ultimate contradiction. On the one hand, shoppers often have dwell time at airports. As a result, there tends to be a lot more aimless browsing than focused shopping. 

On the other hand, there is a limited window of time to get people to buy. If check-in and immigration are arduous, it bumps people out of shopping mode. 

The full-frontal assault on the shopping senses is often overwhelming and has precisely the opposite of the intended effect. Picture hurrying shoppers with eyes down to avoid getting sucked in. 

This so-called ‘golden hour’ for retailers is increasingly competitive, with more brands and more experiences jostling for shopper attention.

The importance of retail staff

With so much competition, retail fundamentals have to be spot on. Staff must be on point. 

Travellers will be coming from an array of different countries and cultures, with diverse expectations. Staff have a huge role to play in converting the rump of shoppers who may be interested in products but unwilling to commit. 

Converting the impulse shopper is the key role for staff in these environments. With basket sizes significant in travel retail, every lost shopper has an impact. Likewise, every upsell has a real impact.

Lean into the occasion

Travel retail needs to lean into the occasion. Be attuned to the shopper and their likely mission. 

Often, retailers in this space are dealing in ‘memories’. Travel retail shopping is part of the holiday or leisure break. We need to tap into that sense of remembrance. Be hard-wired into the ‘holiday mood’ to stimulate pleasure and avoid, at all costs, the everyday.

This means innovating and rethinking stores as well as the sensory experience. 

Shoppers are increasingly tech-savvy and retailers are missing a trick if they don’t leverage this within travel retail. Digital experiences and entertainment are crucial. 

Perhaps even more crucial is pre-trip engagement. If we engage shoppers before they enter the Hawker’s market at the airport, we stand a much better chance of success. This could take the form of personalised email campaigns, targeted ads on social media, or app notifications highlighting exclusive airport offers. 

Travel and retail go hand in hand 

To win, retailers need to understand the shopper’s journey and create both entertainment and engagement. Relevance, differentiation and investment in staff are all required for success.

ood afternoon. I’m Francis from Panama. Welcome aboard and how can I be of help?” The first learning curve of personalised attention aboard Scenic Eclipse II is that every guest has butler service. On this 10-night expedition cruise through the Kimberley, from Broome to Darwin, I’ve already unpacked and mastered my suite’s “lighting menu”, because someone’s had the eminent sense to label each switch. But Francis has a job to do. He points out the other bells and whistles and I ask him to make bookings for meals. I leave to snoop around the ship and an hour later return to find he’s left a printed sheet, my dining schedule all sorted.

Launched last year, the 228-passenger Scenic Eclipse II is a clone of the company’s first ship Scenic Eclipse, and neither has sailed the Kimberley until now. This cruise is part of a Tastes of Discovery series, so we’re blessed with the presence of not only Scenic’s ebullient kitchen supremo Tom Goetter but his friend Dale MacKay, a celebrated Canadian running the first of occasional pop-ups on Scenic ships.

Several SEII outlets require bookings, although notably none carries a surcharge. Indeed, every mouthful guests consume and, if eschewing the reserve wine list, all of what they care to drink, is included in the fare.

First up I’m booked into Night Market, a newly added venture that transforms street food to fine dining. Tonight it’s Filipino, and among nine tastes are Devilled Itlog (egg with chilli guacamole), Salmon Sinigang (a sour soup) and Kabataan Surprise (a dish of sticky rice, caramelised coconut and mango sorbet). But the hands-down favourite at this intimate sitting for eight passengers is Naughty Adobo, a small roll stuffed with applewood-smoked beef infused with coconut milk and topped by a peanut butter sauce. The Night Market menu switches every few days, to Middle Eastern, Indian and, finally, South East Asian.

This meal has set a high bar for the rest of the voyage, and you sense Scenic stakes a lot on its culinary credentials. Guests descending to the Zodiac pontoon pass a huge banner displaying Goetter, who bears the lofty title of Vice President, Scenic Group Oceans Hotel Operations, standing with Jason Flesher, Expeditions Operations Director. They flank Erwan le Rouzic, aka Captain Everywhere because he’s the most visible skipper afloat. Le Rouzic describes this 17,000-tonne, all-suite ship as a “discovery yacht”, as it’s built for Antarctic conditions, but there’s nothing hard-edged about either the facilities or the food.

My Deck 8 suite is designated Deluxe Verandah and, at 34sq m, covers over-generous levels of sleeping, living, bathroom and storage space. Francis and I come to an understanding about the mini bar. I’ll ignore the soft drinks and Heineken, but when replenishing the teabags from renowned Singapore brand TWG, plenty of Earl Grey please. Otherwise, I leave Francis be, as other guests may have more pressing needs, such as the Canadian I dine with on one occasion, who has caviar delivered every night.

Of SEII’s 10 dining options, I try eight, never considering in-suite dining, while the Chef’s Garden experience passes me by. The Yacht Club buffet (breakfast and lunch only) on Deck 7 sensibly doesn’t overwhelm with choices, the best of which are the cold cuts, salads and gelato. In daylight hours, I prefer Azure, a cosier indoor-outdoor full-service cafe two decks below. It’s here that I appreciate the quality of the bakers and pâtissiers on board, who create the likes of brioche as fluffy as silken tofu for French toast, and a perfect Paris-Brest, that sublime combination of praline mousseline and choux.

Dinner occupies several venues. Koko’s mines many Asian cuisines for inspiration, including a dish that divides the ship. Some diners admit they’re unsure of wasabi gelato, others just don’t like spicy vegetable desserts. Others, like me, praise it to the hilt. The devilish green paste also resides at Koko’s offshoot, Sushi & Sake, another reservation-required experience. Watching master slicer Tony preparing sashimi with such skill and so little effort, I realise I must get my own knives sharpened. The sake comes warm or cold. Or as a Sake Cloud, a bowl of fairy floss melted under a pour of this warm rice wine, Japanese gin, Cointreau and ginger juice. I give the main walk-in restaurant Elements a couple of goes, where the deal is four choices across four courses, including faultless pasta and risotto.

Several times on each cruise, there’s an invitation-only Chef’s Table. Ten guests, 10 stunning courses, 10 fascinating wines and the one-and-only Tom Goetter revealing his life story and philosophy as he introduces each dish. Born into a family of chefs in Germany, he took himself around the world for 10 years, knocking on kitchen doors, including at both Quay and Park Hyatt in Sydney. He flirted with becoming a clown and is still a performer, as well as something of an illusionist. What appears to be a tiny toffee apple is foie gras on a bed of fairy floss, which we dissolve with a tiny vial of vinegar. And what’s this ashtray containing, well, ash? Goetter tells us of observing a Mexican street vendor blowing cigar smoke into his taco dough. “He became my silent mentor,” he says. “This man has made simple food outstanding.” So we dip our “cigar” of beef, beans, avocado, cilantro and cumin, into the (vegetable) ash.

The ship’s third bookable restaurant is French-themed Lumiere, and on my first night there, a presentation appears of four beautiful entree morsels followed by duck breast confit, which requires negotiation. I think the waiter is trying to say that while the kitchen prefers it medium-rare, most diners feel more comfortable with medium. OK, no one wants undercooked duck, but I can’t think of a chef worth their checked trousers who’d overcook it, and the medium-rare I request is lovely. The oddity of this meal, indeed of any I have on board, is a rare failure in the form of a fromage cheddar croissant that arrives as a cold, dry, tasteless breadstick, so something has gone awry. I’m delivered the alternative, an unctuous chocolate tart.

For the last few nights, Dale MacKay takes over Lumiere. He met Goetter on a TV show called Top Chef World All Stars, and whereas the latter’s Chef’s Table is an event, this is just a perfect meal, from chilled chilli cantaloupe soup, plus a concoction of cod, clams, mussels and lobster simply called Celebrating Seafood, to Tasmanian lamb in a brown butter curry. And head patissier Heike Scholl justifiably is swiping the strawberry pavlova for the permanent menu.

Goetter likes his ships to taste of where they are so several meals feature mangrove Jack, a hero fish in these parts, and in port he’ll send out cashed-up chefs in search of whatever’s good. The tale is also told of how Goetter, spying a passing trawler some weeks earlier, negotiated the purchase of 250kg of shrimp and sent SEII’s helicopter to collect it. The choppers also take guests fishing, and their catch goes into the kitchen, to be served several nights later.

SEII’s complimentary wine options are diverse and interesting, both new world and old. You’ll initially be offered whatever white and red the server may have picked up, but it’s also OK to request something you’d prefer. The ubiquitous house Champagne comes from a co-operative called Chassenay d’Arce, but the crowning glory of the bar offerings is the wall of whisky in the main lounge. There’s around 120, from Scotland, Japan, North America and renowned Australian labels such as Lark and Sullivans Cove, all free to a good home.

This is an expedition cruise, and in time we get excursions, but none on the first few days as the current and wind defeat efforts to launch the Zodiacs safely. Eventually we get away for close-ups of the Horizontal Waterfall in Talbot Bay, spot sea critters galore off Montgomery Reef, and inspect many intriguing rock art sites. The final off-ship lark is a thrilling scoot up the King George River to its twin falls.

My favourite is a morning spent on an albeit fruitless crocodile hunt in spectacular Prince Frederick Harbour. We drift close to the mangroves, hoping to find one sunning itself on the bank, but the only sighting is some claw marks in the mud. No worry, as it’s fine simply to be gliding past these stirringly beautiful red sandstone cliffs. Returning to base, our guide steers an unnecessary wide course until we rendezvous with another Zodiac, that is. And who should pop up but Captain Everywhere with elevenses, plastic flutes and Chassenay d’Arce at the ready. SEII may be powered by mangrove Jack and wasabi, but it floats on Champagne. And the occasional tot of Scotch.

In the know

Scenic Eclipse II returns to Australian waters in 2025, sailing the Kimberley from July 21 to September 27. From $16,465 a person, twin-share in a Deluxe Verandah Suite for an 11-day cruise.

The next Tastes of Discovery cruise is Rhythms of the Brazilian Coastline, featuring Michelin-starred Mexican chef Gabriel Rodriguez, from November 16 this year. From $8,345 a person, twin-share with a complimentary upgrade to a Deluxe Verandah Suite.