Qantas posts record profit after painful restructuring

The carrier shed thousands of staff, taken billions of dollars in writedowns, withheld dividends, cut flights to keep ticket prices up and locked in fuel hedging contracts that let it benefit from a slump in the oil price.

Reuters

Qantas Airways on Wednesday posted a record annual profit and declared its first final dividend in eight years, as it reaped the benefits of a painful restructure undertaken in the face of fierce global competition.

The result vindicates chief executive Alan Joyce who has faced sometimes bitter criticism from shareholders, passengers and employees since undertaking the costly shakeup of the so-called “flying kangaroo” two years ago.

Under his watch, the company has shed thousands of staff, taken billions of dollars in writedowns, withheld dividends, cut flights to keep ticket prices up and locked in fuel hedging contracts that let it benefit from a slump in the oil price.

“We’re confident about our ability to navigate through all market conditions in the short term and we’re hugely excited about our opportunities over the long term,” Mr Joyce said on Wednesday.

Pre-tax profit, Qantas’s most closely watched measure, totalled A$1.42 billion for the year to June 30, almost double the previous year’s A$789 million result. Even so, it fell short of analysts’ forecasts of about A$1.6bn.

In a sign of how much the airline is relying on cost-cutting to grow profit, sales grew just 3 per cent while fuel costs shrank by 17 per cent, or A$664m.

Each of the company’s main operating divisions – its domestic, international and discount carrier units, and its frequent flyer programme – posted record underlying earnings.

“Most of the companies that have released their results haven’t done that well so Qantas is the standout, and the market’s responded,” said Steven Daghlian, an analyst at Commonwealth Securities, which has a 5.7 per cent stake in Qantas.

Airlines, booking agencies and other travel-related sectors have been hammered by intense competition and uncertainty over issues like Britain’s vote to leave the European Union and the US presidential election.

Qantas’s smaller domestic rival Virgin Australia said last month its full-year net loss more doubled.

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