Qantas Half Yearly report is in and it has seen its first-half profit fall because of heavier fuel costs. Qantas’ profit was down 18% to $780 million from the same time last year. Over the six months, Qantas spent $2 billion on fuel alone, a $416 million increase.
Qantas is not the only airline affected by rising fuel costs however it continues to soar above its rivals. Qantas substantially reduced the gap between the increase in its fuel bill ($416 million) and a fall in earnings ($179 million) through a strong revenue performance. In fact, it was a record result for Qantas Domestic, Jetstar Domestic and Qantas Loyalty. Qantas’ international operations were hit hardest because on longer routes fuel cost is a much bigger factor.
It says a lot about how much more resilient Qantas is to changes in the external environment.
Alan Joyce is confident Qantas will have a strong second half because:
- Forward bookings are strong
- Prices have declined from the peaks of last year
- Fuel for FY20 is fully hedged with 73% in favourable price movements
- The fuel-guzzling 747’s has now all been replaced by the fuel-efficient Dreamliners
- Competitor capacity on international routes look set to fall
- FY19 cost cuts are on track to be at least $400 million
- Despite Qantas’ fleet upgrade and the upgrading of its lounges and product Qantas’ debt remains at the bottom of its target range
The maintenance of Qantas’ returns to its shareholders (about $500 million) underscores the confidence Qantas has in the future. Qantas have announced an interim dividend increase to 12 cents a share fully franked plus an on-market buyback of up to $305 million.