Date
25 May 2017
Qantas sold or delayed delivery of 50 planes, laid off 5,000 workers  and dropped unprofitable routes as part of an aggressive cost-cutting two years ago. Photo: Reuters
Qantas sold or delayed delivery of 50 planes, laid off 5,000 workers and dropped unprofitable routes as part of an aggressive cost-cutting two years ago. Photo: Reuters

Qantas soars to record profit on cost-cutting, cheaper fuel

Qantas Airways Ltd. rode an aggressive cost-cutting program and cheaper oil prices to a record first-half profit and its second capital return in less than a year.

Underlying pretax profit in the six months to Dec. 31 more than doubled to A$921 million (US$666 million) from A$367 million a year earlier, Bloomberg reports, citing a company filing.

Analysts expected profit of A$908.7 million, according to the average estimate compiled by Bloomberg.

Qantas, gaining from a A$2 billion recovery plan laid out by chief executive Alan Joyce, announced a stock buyback of as much as A$500 million, taking the capital return to more than A$1 billion in less than a year.

The airline, which is also being helped by slumping fuel prices and a weaker Australian dollar, is expected to report a record full-year profit.

“The buyback while expected is certainly higher than what most investors thought they’d get,” said David Liu, who helps oversee A$450 million including Qantas shares as head of research at Above The Index Asset Management in Sydney.

“The outlook is quite positive with fuel prices set to remain low and more upside still to come from the cost cut program.”

Underlying fuel costs in 2016 are expected to be no more than A$3.4 billion, the airline said.

Qantas said it expects to reap A$450 million in benefits from Joyce’s turnaround in 2016.

The airline hasn’t paid a regular dividend since 2009 and as its earnings now rise, investors are looking for regular payouts.

Net income in the half year climbed to A$688 million from A$203 million reported a year earlier, the company said. Revenue climbed 5 percent to A$8.5 billion, Qantas said.

Just two years ago, Joyce laid out a transformation program for the airline as losses widened and the stock hovered near a record low. Qantas was locked in a market share battle with Virgin Australia Holdings Ltd. and the Australian government was refusing to guarantee Qantas’s junk-rated debt.

Joyce pledged to chop A$2 billion in costs, sell or delay the delivery of about 50 planes and ax about 5,000 workers.

He has also pared back unprofitable international routes in favor of alliances with Emirates and American Airlines.

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FL/RA

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