Qantas has lifted its bottom line back into the black, posting a modest full year profit, a year after recording an historic loss.
Qantas’s $5 million profit is against the background of the battle for Australia’s airways reducing local earnings.
And chief executive Alan Joyce warns that this year’s operating environment was expected to be challenging and volatile.
The company’s biggest earner, domestic travel, suffered a 21 per cent fall to $365 million in earnings before interest and tax (EBIT).
Qantas-owned low-cost airline Jetstar’s EBIT fell 32 per cent to $138 million.
You might like
A halving of losses, to $246 million, in its international division was a main driver behind Qantas’ move back to profitability.
Its 9.4 million member frequent flyer program was also crucial, contributing EBIT of $260 million.
Mr Joyce said the company’s focus on increasing capacity, by eight per cent, had contributed to the fall in domestic earnings with the extra seats not being fully filled.
Capacity growth would now slow, he said.
Stay informed, daily
“We can now digest that growth and maintain our 65 per cent (market share) profit maximising position,” he told reporters on Thursday.
Underlying profit, which excludes significant one-off costs such as restructuring, was up, as expected. It more than doubled to $192 million, compared with $95 million last year.
Mr Joyce said cost-cutting measures, including the restructure of the airline’s international network, had delivered $171 million in benefits to the company.
The group’s comparable costs per unit were down five per cent, he said.
Morningstar analyst Nathan Zaia said it was important the international segment at least break even, given it had been losing everything the domestic unit made, and that the brakes were put on capacity growth.
“Both of them (Qantas and rival airline Virgin Australia) at some point have to slow down in capacity growth and accept their positions and let passenger demand fill up the gaps in the extra seats,” he told AAP.
“It is the only way to lift profitability, but if they keep trying to slit each other’s throat I guess everyone loses.”
Rival Virgin has forecast a $95 million-$110 million loss ahead of announcing its results on Friday.
Qantas shares were up 11.25 cents, or 9.2 per cent, to $1.343 by 1330 AEST.
The airline did not declare a dividend for the fourth year in a row.
