Fuel costs clip Qantas’ wings as profits slip

Despite the earnings decline Qantas had the confidence to announce the return of A$500 million to shareholders through dividends and share buybacks

Despite the earnings decline Qantas had the confidence to announce the return of A$500 million to shareholders through dividends and share buybacks

Underlying profit before tax fell to A$780 million (S$755.3 million) for the six months ended December 31, from a record A$959 million a year ago, adjusted for accounting changes, and its lowest since 2015.

Australia'sQantas Airways Ltd on Thursday reported a 19 percent fall in half-year profit, as increased worldwide revenue failed to fully offset a margin squeeze from higher fuel prices.

Qantas has blamed a significant plunge in profits on higher fuel costs, while generating a half-billion-dollar return for investors.

"Looking ahead, we believe the Qantas Group is well positioned", Chief Executive Alan Joyce told reporters, pointing to strong forward bookings, slowing capacity growth by rivals in the worldwide market and cost-cutting measures.

The airline recovered fuel price increases through higher fares in the domestic market in the first half but was unable to make up those costs on worldwide fares due to stiff competition.

"Our dual brand strategy with Qantas and Jetstar in the domestic market meant these segments delivered another set of record earnings".

Demand from the resources sector had returned to growth, and Qantas was adding about 10 per cent extra capacity to WA mining routes, but otherwise expected stable seat growth to be flat for the rest of the half.

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Qantas will launch a fresh $305 million buyback despite first-half profit falling 16.3 per cent to $498 million on a big jump in fuel costs.

Underlying earnings from domestic operations rose 0.9 per cent to a record $453 million, with a 5.7 per cent in revenue more than offsetting the increased fuel costs.

"That's easier to achieve in the domestic market than on longer global routes, where fuel is a much bigger factor, and that's reflected in the segment results we're reporting today".

"We also saw an increase in selling costs, simply due to the commissions associated with the 6 per cent rise in revenue, as well as costs linked to a weaker Australian dollar".

"Few industries can eradicate waste completely, but with this program we're saying that avoidable waste should no longer be an acceptable by-product of how we do business", Mr Joyce said.

Load factor grew by one percentage point to 85.5 per cent and capacity growth rate moderated to 1.3 per cent in a market that grew by 3.8 per cent.

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