Qantas and the market are back in love. Several months of estrangement saw investors and analysts marking back the prospect for the airline as global oil prices rose to more than $US50 a barrel. That saw the shares sold off from their most recent highs in April around $4.16 to a low of $2.61 in late June as oil prices peaked, only to fall sharply in July and early August before rebounding again.
But Qantas shares continued to rally strongly, rising 30% to yesterday’s profit announcement. While that still left them down 17% for the year so far, it is better than a loss of double that.
The dividend resumption (the first since 2009), yet another buyback and prospects of more capital management to come if the airline continues its recovery, saw the shares end up 2% at $3.45.
The record full-year pre-tax profit of $1.53 billion for the year to June 30, up 57% and the best ever helped improve market belief in the airline.
CEO Alan Joyce said the result showed the transformation program was paying off. “Transformation has made us a more agile business, created value for our shareholders and given us a platform to invest for the future,” he said. “Qantas is stronger than ever, but we’re also determined to keep changing and adapting so that we can succeed no matter what environment we’re in.”
Qantas Domestic, Qantas International, Jetstar and Qantas Loyalty all reported record results. Total underlying domestic earnings across Qantas and Jetstar increased $191 million to $820 million, while international earnings were up $374 million to $722 million (and three years ago that division was struggling to break even!).
The airline says it has made $1.66 billion in permanent cost and revenue savings since it started its revamp in 2014 and has another $2.1 billion on the cards by the end of June next year.
Effective “fuel hedging” saved Qantas $664 million through lower global fuel prices compared with the previous financial year, with some of those savings passed through to cut airfares. Qantas claims its Australian ticket prices are up to 40% lower than they were 10 years ago.
And the airline is paying a $3,000 one off bonus to all 25,000 staff and the capital management for shareholders includes the 7 cents a share, or $134 million final dividend and $366 million for a share buyback.
Qantas also said that after a trial of high-speed in-flight Wi-Fi earlier this year, it is now in the final stages of working out options to extend the service to regional and international fleets.
It’s also exploring a partnership with Cricket Australia to live-stream cricket on its Wi-Fi enabled planes during the summer season.
“We’ve renewed our aircraft, lounges, technology and the training we provide for our people, who’ve done a phenomenal job to earn record customer satisfaction,” Mr Joyce said.
“Today’s result means we can build on those investments, with some really exciting projects in the pipeline to make the experience of flying with Qantas even better. Our plans for the Qantas Dreamliner, in particular, will set new standards for the industry.”
