Qantas has shrugged off higher fuel costs with record first quarter revenue

Saeed Khan/AFP/Getty ImagesQantas CEO Alan Joyce.
  • Qantas first quarter revenue up 6.3% to $4.41 billion.
  • Rising fuel costs substantially offset by passenger revenue growth.
  • Qantas is on track to deliver at $400 million in transformation benefits in 2019.

Qantas posted record revenue of $4.41 billion, up 6.3%, for the first quarter, partially offsetting higher fuel bills.

Full year fuel costs are now expected to be $4.09 billion, up from $3.23 billion last year.

The airline says rising fuel costs are substantially offset by net passenger revenue growth and capacity discipline.

CEO Alan Joyce says a combination of positive market conditions and strategic advantages helped the result.

“Our record passenger revenue performance for the first quarter meant that we were able to substantially recover higher fuel prices,” says Joyce.

“Market demand for travel remains fundamentally strong and we’re seeing some wind-back of competitor capacity growth.

“When you look across our portfolio, we have a number of factors that help us manage cyclical headwinds impacting the sector. We have a leading position in the domestic market, structural advantages in our international businesses and diversified earnings from Loyalty.

“We have a strong focus on cost and we’re continuing to invest in aspects of customer experience that deliver a competitive edge and margin benefit. The lounge investment we’ve announced in Singapore is a good example of that.”

The value of forward bookings is up 8% on flat capacity compared with same time last year.

The strong revenue performance also helped partially offset a rise in non-fuel costs, such as higher commissions paid to travel agents on the higher revenue and the impact of a weaker Australian dollar.

“Based on the value of forward bookings and broader market conditions, we’re confident in our ability to manage higher fuel costs and keep investing, while still delivering strong net free cash flow and long term shareholder value,” says Joyce.

The Qantas Group reaffirmed its outlook for capital expenditure, transformation benefits and depreciation.

The airline has now hedged 76% of its fuel for 2019 and 39% for 2020 with the ability to benefit from significant price falls.

Qantas is on track to deliver at least $400 million in transformation benefits in 2019, with the majority of the cost improvements in the second half.

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