Qantas recorded an extraordinary half-year profit before tax of 1.428 billion on the back of better-than-expected demand for flying post-COVID.
Qantas called the result a significant turnaround that was underpinned by “revenue strength” offsetting record fuel prices.
The widely-expect result comes despite the wider group recording an underlying loss before tax of $1.86 billion in its last full-year results and claiming the pandemic cost its airlines $7 billion in total.
Chief executive Alan Joyce said, “This is the recovery our people, our shareholders – and in many respects, our customers – have been waiting for. Because this result isn’t just about a single number. Ultimately, it’s about getting back to our best by reinvesting in the national carrier.
“All of our segments performed well, and the detail is in the documents we’ve released today. But there are some broad drivers of our financial performance that are worth singling out.
“The first is travel demand, which remains very robust, particularly for leisure. While interest rates and inflation are expected to hit discretionary spending at some point, we’re yet to see any signs of that in our bookings.
“In fact, the research shows travel is one area that people want to prioritise over the next 12 months.
“That flows into the second factor, which is higher yields – particularly given most international airlines are still working to restore capacity back to pre-COVID levels.
“The last driver is the $1 billion in restructuring benefits that are flowing through. That restructuring – which we announced almost three years ago – was about making sure we survived the pandemic and bounced back quickly, which is exactly what’s happening.
“That said, some costs are up. We’re keeping more spare aircraft in reserve and rostering more crew to give our operations extra buffer. The estimated disruption cost is $200 million this financial year, and it will steadily unwind as things continue to stabilise.”
Joyce hailed the “incredible grit and dedication” of staff over the last year to deal with “operational challenges” in a nod to huge delays and cancellations last winter.
“Around 20,000 non-executive staff across the Group are eligible for shares and cash bonuses of up to $11,500,” said Joyce.
“Today, we’ve added another $500 in staff travel credit as an extra way to say thank you.
“In total, we’ve set aside over $400 million for reward payments for our people, on top of significant EBA- related pay increases.
“And in the coming weeks, we’ll be announcing a major investment in training, which will benefit the broader aviation industry as well as the Qantas Group.”
Earlier this week, Qantas revealed it would use its strong bounce back from COVID and return to profitability to build four new lounges, including creating a new flagship space in London’s Heathrow to coincide with the launch of Project Sunrise.
The $100 million investment will also be spent on upgrading existing lounges, including refreshes in Hong Kong, Melbourne and Sydney. The airline called it the “single biggest investment” in the lounges in more than a decade.
“Being back in profit means we’re back to making long-term investments for our customers,” said Joyce.
“That started with the major aircraft order we announced last year, and now we’re building on that with a major investment in our lounges.
“Millions of people a year visit our lounges, and they are typically our frequent flyers who travel with us the most, so anything we do to improve them is a way of saying thank you to our most loyal customers.
“We have three new and upgraded lounge spaces due to open this year, and the pipeline we’re announcing today will take us through to 2025.
“London is one of the most important destinations on our network, and it’s the perfect location for a First Lounge, especially with our direct Project Sunrise flights on the way.
“Heathrow is one of the world’s busiest airports, so we’re very pleased to be working with them to secure a great space in the terminal for an additional lounge.”
The new lounge in Heathrow will open in late 2025 and coincide with the launch of direct flights between the UK capital and the east coast of Australia. It will operate alongside the current international lounge, which will become dedicated to business.
The investment also follows a major investment in new aircraft, including six more A321s that it will then convert into freighters; 12 Airbus A350-1000 jets to launch Project Sunrise; and 20 Airbus A321XLRs and 20 A220-300s to fly its domestic routes, which includes an option to purchase up to 94 additional aircraft through to 2034.
The announcement of its extraordinary turnaround in profitability since the pandemic also comes as the airline appears to have put its performance troubles behind it.
Last year, the national carrier faced a string of problems, including huge delays at Easter, hours-long call wait times, and even a revelation that the cabin crew of a Qantas A330 were made to sleep across seats in economy. However, in November, it recovered to become the best airline for cancellations and avoiding delays and has performed strongly since.
More to follow…