Qantas annual profit falls after one-off in prior year

Friday 25th August 2017

Australia's biggest airline Qantas Airways said its net profit fell as the benefits of lower fuel prices were offset by the reduction in net passenger revenue and after a one-off gain in the prior year.

The Qantas Group said net profit in the year to June 30 was A$853 million, or 46 Australian cents, down from A$1.03 billion, or 49.4 Australian cents, in the prior year, which included the gain on sale of the Sydney Domestic Terminal. Underlying profit before tax was A$1.4 billion versus A$1.5 billion in the prior year. Qantas said the result was slightly ahead of guidance due to strong domestic performance.

Within Jetstar International - which includes New Zealand domestic and regional as well as Australia outbound flights among others - it pointed to a successful dual brand strategy in New Zealand with a strong network serving business and leisure customers.

It did not provide any specific New Zealand numbers but did point to "improved New Zealand performance." Within Jetstar International, passenger numbers jumped 8.4 percent to 6.2 billion while its revenue per kilometres rose 5.2 percent and its available seat kilometres rose 1.0 percent. That compares to a group wide lift of 1.9 percent in passenger numbers while its total available seat kilometers increased by 1.1 percent and its revenue passenger kilometers rose 1.8 percent.

The Jetstar Group, which includes Jetstar International, reported underlying earnings before interest and tax of A$417 million, down A$35 million on the year, but still the second highest in its history, it said.

“Three years ago, we started an ambitious turnaround program to make the Qantas Group strong and profitable. We tackled some difficult structural issues, became a lot more efficient and kept improving customer service. Today’s announcements show this plan has well-and-truly paid off," said chief executive Alan Joyce.

Group wide revenue fell by 1 percent A$16 billion. Net passenger revenue was down 1 percent, weighed down by competitive pressures in international markets and the ramp up of new routes. Net freight revenue was down 5 percent.

The company declared a final dividend of 7 Australian cents per share, to be paid on Oct. 13 with a record date of Sept. 11. It also announced a new share buyback programme worth up to A$373 million. Once this latest buyback is completed the number of Qantas shares is expected to have been reduced by more than 20 percent since October 2015.

The company also said non-executive Qantas Group employees will receive a bonus of A$2,500.

Looking ahead, it said it is investigating direct flights from the east coast of Australia to London and New York by 2022. Joyce said a challenge has been given to Airbus and Boeing to give their next-generation aircraft currently under development the range to make these non-stop flights possible with a full passenger load.

A direct flight would cut total journey time by up to four hours on Sydney-London and almost three hours on Melbourne-New York, he said.

"We believe advances in technology in the next few years will make Sydney to London direct a possibility and Qantas is well placed to be the airline to do it," he said, adding that any aircraft purchase would have to meet strict financial thresholds.

The ASX-listed stock last traded at A$5.80.

(BusinessDesk)

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