Strong competition on international routes and subdued demand due to the federal election has cut into revenue at Qantas.
Revenue fell 3% to $3.98 billion in the September quarter, however, some of the drop will be made up by continued cost cutting and lower fuel prices.
The airline says it expects a first half underlying profit before tax in the range of $800 million to $850 million.
That would be the third best first-half result in Qantas’ history but below the underlying profit before tax of $921 million in the first half of 2016.
Qantas posted a record full year underlying profit of $1.53 billion in August, a 57% improvement, completing one of Australia’s biggest corporate turnarounds. The improved profitability is on the back of a $2.1 billion transformation program.
“Like most carriers globally, we are seeing international air fares below where they were 12 months ago, but the impact of that is tempered by the competitive advantages we’ve been working hard to fortify including our strong domestic position and diversified Loyalty business,” CEO Alan Joyce told the ASX in a quarterly update.
“We remain disciplined on cost, continue to manage capacity carefully to match demand, and have secured the benefit of lower fuel prices through our hedging. And at the same time, we will continue to invest in building the Group’s long term competitive advantages, including our brand, customer service and product.”
Domestic Qantas and Jetstar revenue fell 2.9% in the first three months of the financial year.
The airline says July and August were impacted by the overhang of weak demand around the federal election. Market conditions in September reverted to the more stable environment seen before the run-up to the election.
Qantas International, Jetstar International and Jetstar Asia revenue fell 6.9% with lower fuel prices and higher levels of market capacity growth resulting in more competitive pricing.