QANTAS LAUNCHES $500M BUYBACK AFTER RECORD PROFIT

QANTAS LAUNCHES $500M BUYBACK AFTER RECORD PROFIT

QANTAS (ASX:QAN) today announced a record first-half performance for FY16, marking the 2015 calendar-year result as the best in the airline's 95-year history.

Qantas reported an underlying profit before tax of $921 million for the six months ending December 31, an increase of $554 million from the prior corresponding period.

Revenue jumped 5 per cent to $8.5 billion, while total unit costs dipped 7 per cent compared with the first half of FY15.

Strong cash generation was another highlight of the half year, with operating cash flow of $1.4 billion - almost double the prior half year - and free cash flow of $770 million.

On the back of the result, Qantas has announced a share buyback of up to $500 million, commencing in early March, in a move that indicates restored confidence in the business.

While every division of the Qantas Group contributed to the result, Qantas Domestic, the Jetstar Group and Qantas Loyalty led the trend with record underlying profits.

Qantas Domestic reported underlying earnings before interest and tax (EBIT) of $387 million, compared with $227 million in the first half of FY15.  Meanwhile, Jetstar Group reported EBIT of $262 million, compared with $81 million a year earlier.

CEO Alan Joyce says Qantas is securing greater benefits from lower fuel prices than its competitors because of its approach to hedging.  The group's fuel bill was $448 million lower in the first half of FY16, relative to last year.

However, the success of the company in FY16 is largely attributed to the company's $2 billion transformation program, which has realised $1.36 billion of benefits in two years of the three-and-a-half-year program.

"This record result reflects a stronger, leaner, more agile Qantas," says Joyce.

"Without a focus on revenue, costs and balance sheet strength, today's result would not have been possible.

"Both globally and domestically, the aviation industry is intensely competitive.  That's why it's so important that we maintain our cost discipline, invest to grow revenue and continue innovating with new ventures and technology."

In August 2015 Qantas placed an order for a new fleet of Boeing 787-9 Dreamliners for its long-haul fleet, to be delivered from 2017.

Joyce describes the purchase as a 'milestone' acquisition and says the first-half FY16 performance is the platform to keep investing in experiences.

Qantas is set to create a new lounge at London's Heathrow Airport, to be opened in the first quarter of 2017, and has confirmed it will partner with ViaSat to develop a free wi-fi service across its domestic fleet, harnessing the NBN network.

On-board trials are expected to begin later this year, and will enable customers to stream live sports, movies and TV shows.

"What we've been waiting for is the ability to deliver the same speeds in flight that people expect on the ground, and we now have technology to make it happen," says Joyce.

Qantas has declined to release a profit guidance for FY161 due to industry and economic dynamics.

Despite the profit turnaround, the Qantas board has elected not to pay an interim dividend.

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

Looking for a credit or charge card that’s built for your business? Try American Express
Partner Content
A good credit card should work for you, not against you, and let you and your business ...
American Express
Advertisement

Related Stories

Going green: Investible backs eight climate tech companies through $30 million fund

Going green: Investible backs eight climate tech companies through $30 million fund

A cohort of eight innovative technology companies contributing to d...

Asahi acquires Byron Bay-founded 'adult' soft drink maker StrangeLove

Asahi acquires Byron Bay-founded 'adult' soft drink maker StrangeLove

The cultural cachet of Byron Bay-founded businesses continues to lu...

Mandatory COVID isolation to end nationally mid-October

Mandatory COVID isolation to end nationally mid-October

National Cabinet has today determined that mandatory isolation peri...

Bottoms up: Sydney cold brew coffee liqueur brand Mr Black acquired by beverage giant Diageo

Bottoms up: Sydney cold brew coffee liqueur brand Mr Black acquired by beverage giant Diageo

Fast-growing coffee liqueur brand Mr Black is joining a portfo...