Qantas posted a 239% increase in half year profit to $688 million, further building on Australia’s biggest corporate turnaround.
The result was at the high end of Qantas’ own expectations and comes on the back of a $2 billion cost cutting program, savings in fuel from lower oil prices and the benefit to the end of a seat war with Virgin Australia, meaning better profit margins per customer.
In early trade, Qantas shares were down 3.7% to $3.84.
Revenue was up 5% to $8.5 billion and overall expenses down 2% to $7.432 billion for the six months to December. No dividends were declared but the airline announced a $500 million on-market share buyback.
The underlying profit before tax of $921 million, up from $554 million, is a record and at the high end of the airline’s own forecast of between $875 million and $925 million for the first six months of this financial year.
Qantas also announced the rollout of in-flight wi-fi on Qantas domestic flights from 2017.
“It means streaming your favourite TV show or movie from Sydney to Perth,” says CEO Alan Joyce. “Or watching an entire cricket or rugby or football game in real time. It will be that fast.”
The Qantas and Jetstar websites will be rebuilt to allow mobile-enabled booking and check-in
Joyce says the $2 billion Qantas transformation program is reshaping the airline into a more agile and innovative business.
In the half, Qantas unlocked $261 million in cost and revenue benefits with $1.36 billion in total now saved since 2014. Transformation benefits in the full year are expected to be $450 million.
Lower fuel prices contributed to a $448 million cut in total fuel costs and more savings are forecast.
Underlying EBIT (Earnings Before Interest and Tax) from Qantas domestic and Jetstar domestic increased by more than 90% to $556 million. Underlying EBIT at Qantas international was $270 million, up from $59 million in the same six months the year before.
Revenue at the Qantas loyalty business, the frequent flyer program, was up 9.7% to $734 million, including 5% growth in Qantas co-branded credit cards and 20% in Qantas Cash currency with $1.5 billion loaded on to cards.
“This record result reflects a stronger, leaner, more agile Qantas,” Joyce says.
“I’m extremely proud of our people, who are working hard to transform the Qantas group and make flying with Qantas and Jetstar better than ever for our customers.
“Without a focus on revenue, costs and balance sheet strength, today’s result would not have been possible.
“Both globally and domestically, the aviation industry is intensely competitive. That’s why it’s so important that we maintain our cost discipline, invest to grow revenue, and continue innovating with new ventures and technology.”
The Qantas Board approved an on-market share buy-back of up to $500 million starting early next month. This builds on last year’s $505 million capital return.
Qantas sees domestic market capacity growth of about 2% in the second half of the financial year.
The airline also expects a one-off positive revenue impact of about $50 million from the Cricket World Cup in 2H15
However, the downturn in the resources sector is having an impact and flights. Western Australia and Queensland are most affected and Qantas expects a $50 million negative revenue impact in the second half. Aircraft are being redirected to meet demand on East Coast and international markets, including Perth-Singapore and to New Zealand.
On international routes, Qantas expects the lower Australian dollar to mean growth in inbound visitors, especially those from China and the US, to continue grow.