Blue sky for Qantas

Airline outperforms Asian rivals

QANTAS boss Alan Joyce has defended the airline’s financial performance, saying it is outperforming its peers across Asia amid fierce competition on international routes due to lower oil prices.

Australia’s biggest airline made more money than Air New Zealand, Singapore Airlines, Etihad Airways, Virgin and Cathay Pacific combined, Mr Joyce said yesterday as Qantas reported a 7.5 per cent drop in underlying profit to $852 million for the six months to December 31.

The result exceeded its guidance, sending shares in the airline higher.

It booked a 25 per cent drop in statutory first-half net profit to $515 million as costs from laying off staff and restructuring weighed on the bottom line, as did gains from asset sales inflating the previous year’s result.

Mr Joyce said the result was the third-best on record, thanks largely to Qantas’s $2.1 billion restructuring program, which included thousands of staff being laid off.

It was outperforming its peers as the industry grappled with increased capacity and lower airfares, he said.

“Everybody in the region is having bigger drops, 50 per cent to 80 per cent drops in the profitability,” Mr Joyce said.

“The resilience of Qantas in this space is absolutely amazing. What we’ve done in transformation has given us that big advantage.”

Qantas’s margin on international operations was 7.3 per cent, compared with 4 per cent or less for regional competitors, he said.

Citi analysts Anthony Moulder and Amit Kanwatia said the airline’s result highlighted its strength relative to other airlines and showed it remained “undervalued”.

Qantas said its restructuring program was on track to deliver $2.1 billion in benefits by June 30, with $1.9 billion delivered to date.

Its international business reported a 23 per cent drop in underlying earnings before interest and tax to $208 million due to increased capacity, while its freight unit posted a 29 per cent drop in earnings to $27 million.

Qantas’ budget airline, Jetstar, and loyalty program reported underlying EBIT growth of five and 3 per cent.

The statutory first-half net profit of $515 million compares with $688 million a year earlier — a result bolstered by a $201 million gain from the Sydney Airport terminal sale.

Qantas said the short-term outlook was subject to many issues, including oil price and foreign exchange movements as well as global conditions. The airline did not provide group profit guidance.