Mixed good/bad news day for Qantas
Qantas today announced a half-year net profit before tax of $90 million on a revenue of $6.9 billion.
The statutory result was in line with guidance provided last December of “between $50 and $150 million.”
Underlying PBT, the key measure used to assess Group performance, was $267 million for the six months to December 31.
Talking up the super-modest result, Qantas CEO Alan Joyce said that while the global aviation industry remained in loss, the Qantas Group had remained profitable.
“According to IATA, the world’s airlines will record net losses of US$5.6 billion in 2010. While the operating environment has been unprecedented and challenging, this result reflects the strength and diversity of our operations,” he said.
However a significant capital expenditure fleet renewal programme prompted the Board not to pay shareholders an interim dividend, and future dividends will be assessed against ongoing earnings performance and capital requirements.
“The global economic crisis, and its impact on demand, revenues and yields, required airlines to take decisive action,” said Joyce. “Qantas’ response was quick but carefully considered, and the tough decisions made last year, particularly in terms of capacity management and cost initiatives, have yielded results.”
He added that the Group’s two-brand strategy, focused on growing both Qantas’ full-service premium and Jetstar’s low-fare products, remained the central plank of its growth plans and of its success.
“It’s not only delivering benefits to our customers, but also to our shareholders. Qantas, in particular, has benefited from the capacity reductions and restructuring activities implemented since April 2009, with substantial cost savings achieved during the current half year.
“Jetstar continues to provide the Group with true diversity, and our broader portfolio of assets with a unique strength and range of revenue growth opportunities.”
Mr Joyce said the result, and Qantas’ future financial and operational performance, was also underpinned by the three-year Q Future cost reduction programme, announced in August 2009.
“Q Future is already delivering significant benefits and efficiencies to Qantas and the broader Group,” he said. “We are well-placed to deliver the 2009/10 target of $500 million in benefits, with more than $200 million in sustainable savings and efficiencies achieved to date.“
Key drivers of the result, compared to the 08/09 half-year, were:
- weaker domestic and international demand and lower fuel surcharges over the last 12 months, that led to a 14.9 per cent decline in yield;
- lower capacity partially offset by an increase in seat (load) factor of 2.7 points;
- average fuel prices 38 per cent lower in the half-year, compared to the prior year, contributing to a net $486 million decline in fuel costs; and
- activity cost savings and benefits from prior year restructuring, which contributed to an 11.0 per cent decrease in operating expenses (excluding fuel).
Non-recurring items included in the half-year result were aircraft write-downs of $48 million, related to changes in the recoverable value of a number of wide-body aircraft held for sale.
Mr Joyce said the Group remained committed to investment in new fleet, customer service, new and enhanced products, infrastructure, leading edge technology and training.
“Even over the last 12 months, the Qantas Group continued to invest, or planned for investment where it was needed,” he said.
“While we took well-timed and prudent action to review and change aircraft orders and deliveries, we remained committed to a long term fleet renewal, backed by one of the world’s largest aircraft order books, with more than 160 new aircraft to be delivered over the next 10 years.
“This will result in new aircraft such as the B787 and more A380s, giving the Group access to operational cost savings, growth and new market opportunities.”
Qantas has also committed to an upgrade program on nine of its Boeing 747-400s, to bring align them with the new Airbus A380’s popular interior and amenities.
“The major upgrade will give all our long haul customers access to our award winning seats and inflight entertainment Qantas offers on its flagship aircraft, the A380,” Mr Joyce said.
“Customer feedback on the Qantas A380 experience is overwhelmingly positive, and this experience, including the fully flat Skybed in Business, the all-new Economy seat and the inflight entertainment system will be available to customers travelling on Qantas B747-400 services.”
Mr Joyce said the changes – which amount to enhanced business and economy offerings and diminished first class capacity, were a response to shifting travel trends across the globe.
Ending the day on an unhappy note, a Qantas Airbus A330 bound for Shanghai had an un-retractable undercarriage problem and had to fly around for three and a half hours burning off expensive fuel to reduce to its maximum permissible landing weight.
Qantas closed at $2.73, down 24c (11%) on the day.
Prime competitor Virgin Blue Holdings will similarly bare its corporate soul next Wednesday.
