Qantas shares up on profit result
A report in The Australian by Steve Creedy says that that Qantas shares jumped 10c yesterday after the airline beat analysts’ expectations to more than double its first-half net profit and post a solid $617.6 million result.
Market confidence was helped by a bullish outlook from the airline, which said it was on track with plans to segment its business and cut costs.
It also said there had been no significant dampening in demand in most markets, including the Australian domestic and outbound travel markets, as a result of the global economic slowdown.
This contrasted with concerns expressed by Virgin Blue on Wednesday that capacity might outstrip demand.
Qantas said forward bookings for the first seven weeks of 2008 were in line with forecasts, and it still expected to achieve a full-year profit at least 40 per cent higher than last year’s.
That is likely to sit well with analysts. “It looks pretty good and there are certainly not the concerns that Virgin Blue had,” JP Morgan analyst Matt Crowe said. “But in the end, the guidance didn’t change.”
The airline reported a record pre-tax profit of $905 million with a net profit after tax of $618 million, up from $307 million last year. Revenues rose 6.4 per cent to $8.12 billion.
“It’s a good result, it’s a clean result and it’s a strong result,” Qantas chief financial officer Peter Gregg said.
Chief executive Geoff Dixon attributed the result to strong domestic and international demand, $311 million of savings from the airline’s cost-cutting program and a strengthening and significant investment in the Qantas brands that led to a doubling in profit. He also pointed to an aggressive build-up of Jetstar’s international and domestic markets that led to a 63 per cent increase in capacity and quadrupling of pre-tax profit to $113 million. “We have two very strongly performing full service and leisure brands,” Mr Dixon said. “Our ability to direct our flying to the most appropriate markets is giving us a unique competitive advantage.”
Mr Dixon and new chairman Leigh Clifford both emphasised the need to stay focused on cutting costs. The airline will complete a $3 billion cost-cutting campaign this financial year and has targeted another $1.5 billion in cuts by June 2010.
It is also positioning its frequent flyer, freight and fleet operations for possible future partial sales or public offerings.
First cab off the rank is likely to be the loyalty program, which made a pre-tax profit of $62 million for the half. Qantas is due to launch an enhanced frequent-flyer program that includes access to all seats on all planes by mid-year. Once these changes are bedded down, it might look at a sale or float of some of the program by year’s end.
A Report by The Mole from The Australian
John Alwyn-Jones
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