Turbulence on the radar
QANTAS Airways shares have slipped after the airline warned rising fuel costs would begin to weigh on earnings.
In a trading update yesterday, the flag carrier said it expected underlying profit – a measure that strips out one-off items – to rise as much as 11.5 per cent in its first half, the six months to December. But it flagged “toughening in trading conditions” in the following six months, with fuel costs among potential headwinds.
Qantas shares tumbled 7 per cent early yesterday after it released the trading update, but recovered much of that ground to end the session 1.4 per cent lower at $6.31.
It follows a surge in the share price – which chalked up a record-high close on Monday of $6.45 – over the past year.
Qantas said that in the three months to September, revenue clocked in at $4.19 billion – up 5.1 per cent on the same period a year ago. It came amid improving trading conditions in both domestic and international, the group said.
Qantas expects its first-half underlying profit to rise from the previous year’s $852 million tally to between $900 million and $950 million, though chief executive Alan Joyce cautioned the domestic market remained highly competitive.
“The high rate of revenue growth we’ve seen so far this year is likely to slow when compared with what was a strong second half last year,” he said.
“There’s been a welcome easing of capacity growth in the international market but the indications are that it is likely to pick up pace again in the second half.” Qantas forecast full-year fuel costs of $3.21 billion, up from $3.04 billion the past financial year.
In an investor report, Goldman Sachs analysts Owen Birrell and Joseph Horbec said Qantas delivered a solid first quarter and the airline’s outlook was “overly cautious”.
Qantas made a net profit of $852 million the past financial year, and $1.4 billion underlying profit.