Australia’s Qantas says H1 profit more than doubles, announces buyback

Underlying profit before tax in the six months to Dec 31 – the airline’s preferred measure of financial performance – was Aus$921 million (US$666 million), at the upper end of analyst expectations.

The airline said every part of its group contributed strongly to the result, with record underlying profits for Qantas Domestic, the Jetstar Group and Qantas Loyalty.

Qantas already returned $505 million to shareholders after its record FY15 profit and has now approved a $500 million share buyback starting in March.

The airline already handed back the vast majority of the $557 million full year net profit announced in August to shareholders in the form of a 23 cents per share cash distribution.

Revenue increased by $8.5 billion and costs dropped by seven percent in the second half of the year.

“Without a focus on revenue, costs and balance sheet strength, today’s result would not have been possible”. The company also announced it expected to hire 170 new pilots over the next three years, its first significant recruitment of pilots since 2009.

‘This record result reflects a stronger, leaner, more agile Qantas, ‘ Mr Joyce said.

“Bringing high-speed Wi-Fi to the domestic aviation market has been an ambition of ours for a long time and we now have access to the right technology to make it happen”, says Joyce, adding that the “goal is to make Australia home to the world’s best in-flight Wi-Fi experience”.

“We are securing greater benefits from lower fuel prices than our competitors because of our disciplined approach to hedging”, said chief executive Alan Joyce.

Qantas will begin on-board trials on domestic flights later this year of a new wi-fi service it’s developing with ViaSat which will allow passengers to stream live sports, movies and TV shows.

Qantas does not have enough franking credits to pay out fully franked dividends because of heavy bottom-line losses of recent years so buybacks are a more effective tool to reward investors.

Qantas secured a first-half benefit of $448 million through fuel hedging, which enabled it to buy fuel at lower prices.

“We expect to unlock a total of $450m in transformation benefits over the full year, and we will continue our momentum to deliver the full $2bn in benefits that we have targeted by the end of financial year 2017”, Joyce said.

Domestic earnings improved to A$387 million, up A$160 million from the previous corresponding period, while the once-struggling global arm was A$270 million in the black, helped by a lower Australian dollar fuel price and more capacity to Asia and the United States. Jetstar Japan made its first profit since start-up in 2012.