Compensation from Boeing for delays in the 787 program has helped Qantas more than double its after-tax profits despite a fall in earnings from its core domestic operations.
Qantas posted a statutory profit of $111 million for the six months ending in December, up from $42 million in the first half of the previous financial year. Pre-tax profits rose 10 per cent to $223 million, but a $125 million payment from Boeing accounted for more than half that total.
Pre-tax earnings from domestic operations – the largest share of Qantas’ business – fell 34 per cent to $218 million, reflecting intensifying competition from Virgin Australia that saw both airlines ramp up capacity, hurting profits. Budget brand Jetstar also saw a 13 per cent drop in earnings to $128 million, which it blamed on stiffening competition and start-up costs from new operations in Japan and Hong Kong.
Qantas International, meanwhile, reported an underlying loss of $91 million – an improvement from the $171 million it loss a year earlier that Qantas hailed as proof its plan to turn around its international wing was showing results.
“Qantas International is well advanced in its turnaround plan,” CEO Alan Joyce said, adding that the 65 per cent improvement in its bottom line was “testament to the steps taken to remove costs from the businesses, from closing down loss-making routs to retiring aircraft and consolidating operations.”
Qantas has placed its long-term hopes for its international business in its landmark alliance with Emirates, set to take effect in April. The airline also today announced plans to refurbish Airbus A330 aircraft used on routes in Asia as it seeks to increase its focus on the near abroad.
In all, Qantas claimed to have realized $172 million in ‘transformation benefits’ during the six month period. “The operating environment remains complex and volatile, but we are beginning to realise the benefits of the tough decisions that we have made over the past 18 months,” Mr Joyce said.
Though Mr. Joyce said he expects domestic capacity to normalise in the medium term, domestic capacity across the Qantas group is expected to rise by 5 to 7 percent during the second half of the financial year as compared with a year earlier.
Qantas did not provide profit guidance for the second half, citing a “challenging and volatile” business climate.