Qantas is counting on sustained travel demand to continue, driving its recovery after returning to profit for the first time since the coronavirus pandemic started three years ago.
The national carrier posted a statutory net profit of $1 billion for the six months to December 31, compared to a $456 million net loss a year ago.
Its underlying profit was even higher, with a record interim pre-tax gain of $1.43 billion – at the top end of the airline’s forecast for an underlying profit between $1.35b and $1.45b in the first half of fiscal 2023.
A rebound in air travel demand helped Qantas notch up revenue of $9.9b, more than three times the figure for the same period a year ago.
The turnaround comes after three years and $7 billion in statutory losses due to the pandemic, as international borders stayed shut for more than 18 months and COVID outbreaks repeatedly disrupted domestic air travel.
“When we restructured the business at the start of COVID, it was to make sure we could bounce back quickly when travel returned,” CEO Alan Joyce said on Thursday.
“That’s effectively what’s happened, but it’s the strength of the demand that has driven such a strong result.”
Qantas said domestic flying levels had averaged 94 per cent of pre-pandemic levels, while international capacity also doubled to 60 per cent.
It expects travel demand to remain robust this year and in 2024 which will help boost domestic capacity beyond pre-Covid levels in the second half of 2023. International capacity is forecast to reach 81 per cent of 2019 levels in the second half.
“While interest rates and inflation are expected to hit discretionary spending at some point, we have yet to see any signs of that,” Mr Joyce said in a post-result media briefing on Thursday.
“The research is telling us that while people are looking at areas to cut back on, they are prioritising air travel and experiences over other forms of expenditure.”
Qantas has benefited from high airfares, which Mr Joyce said were up about 20 per cent on domestic routes compared with 2021 levels, and by similar amounts in key markets such as the United States and Europe.
He blamed soaring prices of fuel, which is up 65 per cent compared to 2019 levels amid the disruption caused by the Russia-Ukraine conflict, and the imbalance between supply and demand for the rise.
The airline boss expects fares to moderate over the next year as more airlines unlock capacity but warned they would stay above pre-pandemic levels because of the difficulty in adding back capacity quickly.
All segments of its business turned profitable during the half year, led by Qantas Domestic which recorded $785m in earnings before interest and tax, compared to a $613m loss a year ago.
Qantas International and Freight was the second most profitable segment, generating $464m in earnings, while Qantas Loyalty garnered a $220m gain. Jetstar recorded half year earnings of $177m.
The airline said net debt was down to $2.4b at December-end, but it has upgraded its full year capital expenditure guidance by $400 million to between $2.6b and $2.7b.
The national carrier will not pay any interim dividend for the half year but announced an extension to its on-market share buy-back by up to $500 million.
The upgraded capex spending and the lack of a shareholder payout weighed on the Qantas stock. By 1500 AEDT, the group’s shares were trading more than 6.0 per cent lower at $6.10, their lowest level in nearly eight months.
© AAP 2023
