Despite the impacts of QF32 and a struggling international operation, Qantas has posted a strong improvement in profitability for the first half of the 2010-11 financial year, announcing a $417 million underlying profit before tax, up 56 per cent, on revenues of $7.59 billion, up 10 per cent. Profit after tax was $239 million, up almost 300 per cent.
“All of the segments within the Qantas Group showed an improvement and profitability – significant improvement and profitability year-on-year – and all of the segments in the Qantas Group are profitable,” CEO Alan Joyce said in announcing the result.
The result was driven by the strong rebound in profitability for Qantas branded operations, and another record profit contribution from Jetstar.
“We now see that Jetstar and Qantas are the most profitable carriers operating in the domestic market. We’re also seeing the biggest improvement in profitability for the Qantas Airlines component of the group, and Jetstar and Frequent Flyer showed record profits for this period yet again.”
By segment Qantas Airlines contributed $165 million in underlying EBIT (earnings before interest and tax) for the half, a 175 per cent increase on the same half in 2009-10, despite Qantas revealing that the QF32 A380 engine failure incident last November cost the business $55 million (with a forecast $25 million cost to the business in the second half of the year), and Qantas CFO Gareth Evans confirming the QF32 incident meant the key Qantas long haul services to the US and UK were unprofitable.
Jetstar’s record profit for the half as EBIT of $143 million, while Jetstar Asia contributed a record S$17 million.
But most profitable of all was the Qantas Frequent Flyer business, which generated underlying EBIT of $189 million.
Across the airline group yields improved by seven per cent, while the company says the QFutures cost cutting program delivered $173 million in savings for the half.
Qantas says its outlook is improving, with forward bookings suggesting further improvements in yield. Fuel costs are expected to be up $2 billion in the second half but are being ameliorated by higher fares and surcharges, while the impacts of the Queensland floods and Cyclone Yasi are estimated to impact underlying profitability by up $70 million in the second half.
Qantas and Jetstar will increase capacity by 11 per cent in the second half compared to the year ago period.