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Qantas has best performance in 95-year history, first-half underlying profit soars

Underlying profit before tax rose 151% percent to $A921 million in the six months ended December 31.

Fiona Rotherham
Tue, 23 Feb 2016

Australia's biggest airline Qantas' underlying performance in the 2015 calendar year was the best in its 95-year history through revenue growth, cost cutting and lower fuel prices, along with benefits from ending its damaging domestic war with Virgin Australia two years ago.

Underlying profit before tax rose 151% percent to $A921 million in the six months ended December 31, while net profit after tax jumped to $A688 million from $A203 million, the Sydney-based company said in a statement. The calendar year performance claim is achieved by summing the last half of the previous financial year and the first half of the current financial year.

The airline announced an on-market share buy-back of up to $A500 million kicking off early next month.

Qantas said it was a record first-half performance with every part of the group contributing to the result. Revenue increased by 5% to $A8.5 billion while total unit costs were down by 7%  compared with the prior first half. It continues the turnaround the airline has been on since racking up big losses as recently as two years ago.

The airline also announced today it would expand its Christchurch to Brisbane service year-round, following a record-breaking summer at Christchurch Airport and its seasonal service achieving flights averaging more than 90% full. From June the service will operate three times a week, rising to four times in summer.

Chief executive Alan Joyce said the record half-year result reflects a stronger, more agile Qantas.

"Both globally and domestically the aviation industry is intensely competitive," he said. "That's why it's so important that we maintain our cost discipline, invest to increase revenue, and continue innovating with new ventures and technology."

The airline's $A2 billion transformation programme delivered $A261 million in cost and revenue benefits in the first half, taking the total benefits achieved to $A1.36 billion since 2014. Total benefits achieved this year are expected to be about $A450 million, despite global volatility.

Effective fuel hedging saw the group gain a $A448 million first-half benefit from fuel hedging that allowed it to take advantage of lower global fuel prices.

Its shares fell 4.8% to $A3.80.

Budget offshoot Jetstar, which has expanded its competition with Air New Zealand to regional air routes, reported record underlying earnings of $A262 million, compared with $A81 million in the prior half. It increased margins by 9.1 percentage points for an operating margin of 13.7%  in the half, while costs on domestic and international flights were reduced 2%. Jetstar Japan made its first profit since start-up in 2012.

Qantas's loyalty programme remains a big money-spinner for the group, delivering record underlying ebit of $A176 million, compared to $A160 million in the first half of last year. Revenue was up 10% with almost 40% of the growth coming from new ventures as the programme diversifies its earnings.

The core Qantas Frequent Flyer programme continued to grow with membership up 6.3% at 11.2 million while co-branded credit cards lifted 5%.

Qantas will begin on-board trials on domestic flights later this year of a new wi-fi service it's developing with ViaSat that will allow passengers to stream live sports, movies and TV shows. A full roll-out is planned early next year.

(BusinessDesk)

Fiona Rotherham
Tue, 23 Feb 2016
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Qantas has best performance in 95-year history, first-half underlying profit soars
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