'Fitter, stronger, smarter': Qantas posts a $3 billion turnaround, announces share buyback

Alan Joyce. Photo: Getty / File

Qantas has posted a full year underlying profit of $975 million, reversing last year’s record $2.8 billion loss.

The airline didn’t declare a dividend but announced a $505 million capital return, a 23 cents per share cash distribution which for most shareholders won’t attract a tax payment.

The statutory profit after tax of $560 million included $186 million of costs driven by redundancies, restructuring and other costs associated with the Qantas transformation program. Revenue was up 3% to $15.816 billion.

Announcing the results, CEO Alan Joyce said: “Qantas is rapidly growing fitter, stronger and smarter.”

The cost cuts realised $894 million in benefits in 2015. Qantas also reduced debt by more than $1 billion. And since January 2014, 4000 of a planned 5000 jobs have gone. The saving target for 2016 is $450 million.

“It is a good feeling to be at the helm of this great company as it begins the first phase of a remarkable turnaround,” Joyce said.

He says Qantas is delighted to restart shareholder distributions after making rapid progress with the $2 billion restructure.

Dividends haven’t been paid by Qantas since 2009.

“Our shareholders have been both patient and supportive as we have worked through the biggest and fastest business transformation in our history,” says Joyce.

“Our first priority has been to put Qantas on a strong footing for sustainable future growth. We are now well into that journey, and with the group returning to its strongest balance sheet since before the Global Financial Crisis, it is fitting to recommence shareholder distributions.”

Staff at Qantas, who have been on an 18-month pay freeze, are getting bonuses under a $90 million scheme previously announced.

Qantas also announced it will acquire eight Boeing 787-9 aircraft, to be delivered from calendar year 2017 and gradually replace five older Boeing 747s.

Joyce says the milestone acquisition of the next-generation Dreamliner for Qantas International marks the scale of company’s turnaround and signals a new phase of renewal and growth.

“We are halfway through the biggest and fastest transformation in our history,” Joyce says. “Without that transformation, we would not be reporting this strong profit, recommencing shareholder returns, or announcing our ultra-efficient Dreamliner fleet for Qantas International.

“We have reshaped our business for a strong, sustainable future – and because we moved quickly and made tough decisions early, we have strong foundations to build on.”

The performance of Qantas business units.

Among the airline’s divisions, Qantas International, hit profitability for the first time since the GFC.

It posted underlying EBIT of $267 million, a turnaround of $764 million from last year’s result.

“The business has pursued growth opportunities through smarter use of aircraft, adding capacity to Los Angeles, Dallas, Vancouver, San Francisco, Santiago, Tokyo and Singapore,” Joyce says.

Qantas International has also announced plans to expand partnerships with key partners American Airlines and China Eastern.

Qantas Domestic reported underlying EBIT of $480 million, compared with $30 million in financial year 2014.

Combined with Jetstar, the group made more than $600 million from its domestic flying operations.

The market liked the result. Qantas shares were up more than 3% to $3.88 in early trade.

Michael McCarthy, chief market strategist at CMC Market, says it’s a great operating result but at the same time an illustration of razor thin margins in the aviation industry.

He says growth of 4.5% is modestly positive but it’s clear most of the improvement comes from factors outside management control, such as falling oil prices.

“The cash return is startling and looks cavalier given the recent history of Qantas and today’s announcement of fleet investment,” he says.

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