She’ll be right says Joyce

QANTAS has forecast a profit recovery in the second half of the year after reporting a 16 per cent slump to $498 million for the six months to December.

Higher fuel costs were the main drag on its performance, with long-haul international routes bearing the bulk of the $416 million jump in fuel costs.

However, this was partly offset by higher ticket revenue and improved performances from domestic operations and its loyalty business.

Shareholders will also benefit despite the lower result, with a 12c interim dividend, compared with 7c a year ago. A $305 million share buyback will also add extra value to remaining Qantas shares.

“Higher oil prices were a significant headwind and we moved quickly to recover as much of the cost as we could,” Qantas chief executive Alan Joyce said.

“That’s easier to achieve in the domestic market than on longer international routes, where fuel is a much bigger factor.”

The company reported total income was up 6 per cent to $9.2 billion. However, total costs were up 9 per cent to $8.3 billion and underlying earnings before interest and tax were $871 million, down 17 per cent. Qantas domestic contributed $453 million to underlying EBIT, up 1 per cent, but international operations was down 60 per cent to $90 million, despite a 5 per cent increase in revenue.

Mr Joyce said the higher fuel costs and foreign exchange differences hit the international division. Jetstar also underperformed, down 20 per cent to report underlying EBIT of $253 million and, despite a strong domestic performance, its international operations pulled the result down.

The Qantas frequent flyer loyalty business was up 4 per cent to $175 million after further expansion of its retail partnerships. Overall, the company was upbeat about the next six months and its performance outlook.

“We believe the group is well positioned for a strong second half and to completely recover our increased fuel cost by the end of this financial year,” Mr Joyce said.