Qantas has best performance in 95-year history, stellar first-half underlying profit soars

Tuesday 23rd February 2016

Australia’s biggest airline Qantas’s underlying performance in the 2015 calendar year was the best in its 95-year history through revenue growth, cost cutting and lower fuel prices, along with benefits from ending its damaging domestic war with Virgin Australia two years ago.

Underlying profit before tax rose 151 percent to A$921 million in the six months ended Dec. 31, while net profit after tax jumped to A$688 million from A$203 million, the Sydney-based company said in a statement. The calendar year performance claim is achieved by summing the last half of the previous financial year and the first half of the current financial year.

The airline announced an on-market share buy-back of up to A$500 million kicking off early next month.

Qantas said it was a record first-half performance with every part of the group contributing to the result. Revenue increased by 5 percent to A$8.5 billion while total unit costs were down by 7 percent compared with the prior first half. It continues the turnaround the airline has been on since racking up big losses as recently as two years ago.

The airline also announced today it would expand its Christchurch to Brisbane service year-round, following a record-breaking summer at Christchurch Airport and its seasonal service achieving flights averaging more than 90 percent full. From June the service will operate three times a week, rising to four times in summer.

Chief executive Alan Joyce said the record half-year result reflects a stronger, more agile Qantas.

“Both globally and domestically the aviation industry is intensely competitive,” he said. “That’s why it’s so important that we maintain our cost discipline, invest to grow revenue, and continue innovating with new ventures and technology.".

The airline’s A$2 billion transformation programme delivered A$261 million in cost and revenue benefits in the first half, taking the total benefits achieved to A$1.36 billion since 2014. Total benefits achieved this year are expected to be about A$450 million, despite global volatility.

Effective fuel hedging saw the group gain a A$448 million first-half benefit from fuel hedging which allowed it to take advantage of lower global fuel prices.

Its shares fell 4.8 percent to A$3.80.

Budget offshoot Jetstar, which has expanded its competition with Air New Zealand to regional air routes, reported record underlying earnings of A$262 million, compared with A$81 million in the prior half. It increased margins by 9.1 percentage points for an operating margin of 13.7 percent in the half, while costs on domestic and international flights were reduced 2 percent. Jetstar Japan made its first profit since start-up in 2012.

Qantas’s loyalty programme remains a big money-spinner for the group, delivering record underlying ebit of A$176 million, compared to A$160 million in the first half of last year. Revenue was up 10 percent with almost 40 percent of the growth coming from new ventures as the programme diversifies its earnings.

The core Qantas Frequent Flyer programme continued to grow with membership up 6.3 percent at 11.2 million while co-branded credit cards lifted 5 percent.

Qantas will begin on-board trials on domestic flights later this year of a new wi-fi service it's developing with ViaSat which will allow passengers to stream live sports, movies and TV shows. A full roll-out is planned early next year.

BusinessDesk.co.nz

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