Australia’s Qantas soars to record profits
AUSTRALIAN carrier Qantas yesterday posted record annual profits and announced its first payout to shareholders in seven years, staging a turnaround after axing jobs and selling aircraft in an aggressive restructuring.
The results were also boosted by the sharp fall in global oil prices and a less competitive domestic market that has given the firm a stable base of earnings.
Other international airlines such as Cathay Pacific, ANA and Japan Airlines have seen profits plunge amid intense competition from lower-cost rivals and as terrorism fears eat into demand.
Qantas reported a net annual profit of A$1.42 billion (US$1.08 billion) in the year to June 30, an 80 per cent increase from the previous corresponding period.
Underlying profit before tax – Qantas’ preferred measure – jumped by 57 per cent to also hit a record of A$1.53 billion.
The company resumed paying dividends of seven cents per share, the first payout since 2009 and announced a share buy-back of up to A$366 million. Qantas also said it would give a A$3,000 one-off bonus to some 25,000 staff who had signed up to a pay freeze.
“These are fantastic results that we’ve had in the last year, as I said, record results for the group,” chief executive Alan Joyce told reporters.
“We do see the strong performance of the company continuing. This business has taken a lot of cost out and improved revenue dramatically. The transformation programme has changed the business completely, delivering over A$1.66 billion in perfor- mance improvements. Without that, we wouldn’t be where we are today.”
Qantas shares closed 1.47 per cent higher at A$3.45 in Sydney trading.
Advantage over global peers
Global ratings agency Standard & Poor’s said the result had no immediate impact on Qantas’ rating, which is currently at investment grade BBB-.
“Underpinning the credit rating is the airline’s prudent financial policy framework that we view favourably against Australian corporate and global industry peers,” S&P said in a statement.
The ratings agency downgraded Qantas to “junk” in December 2013 after the airline issued a shock profit warning and announced job losses, before lifting it from BB+ to ‘BBB-’ last November when earnings improved.
The aggressive push to cut some A$2 billion in costs and restructure the airline over three years began in early 2014, with thousands of jobs axed and dozens of aircraft sold or orders deferred.
Qantas said it has since hit A$1.66 billion in cost and revenue savings – including A$557 million in the financial year ending June 2016. The carrier added that it expected to reach A$2.1 billion in cost and revenue savings by June next year.
“One of the reasons why Qantas is looking quite compelling and is producing very good results of late is the fact that the domestic market here has now basically shrunk to mostly a duopoly between them and Virgin,” IG Markets’ analyst Angus Nicholson told AFP.
“Many other airlines are faced with sharp competition on many of their different major routes, which crimps potential earnings and crimps margin growth.”
Qantas’ domestic business reported record underlying earnings of A$578 million, a 20 per cent increase from the prior year, while its international division posted a 92 per cent jump in underlying earnings to a record A$512 million.
The airline’s discount carrier Jetstar likewise reached record profits, with a 97 per cent leap in underlying earnings to A$452 million.
“Qantas now has this quite comfortable steady cash flow coming from the domestic market that can really finance their ventures into the more competitive international routes and that’s probably its major advantage against many other airlines,” Nicholson added.