Qantas profit climbs

REUTERS

A passenger walks in front of the tail of a Qantas plane at a terminal at Sydney airport.

Sydney - Australia's Qantas banked compensation from Boeing for Dreamliner delays and slashed international losses in reporting Thursday a doubling of six-month net profit, but saw more turbulence ahead.

The flagship carrier also announced a fleet upgrade, after last year posting its first annual loss since privatisation in 1995 amid tough regional competition, damaging industrial action and high fuel costs.

Over July-December 2012, Qantas said its overall net profit jumped 164 percent from the same period of 2011 to Aus$111 million (US$114 million), and it reaffirmed its strategic focus on Asia under a new alliance with Emirates.

The company offered no profit guidance “due to the high degree of volatility and uncertainty in the competitive environment, global economic conditions, fuel prices and foreign exchange rates”.

Nevertheless the stock market welcomed the earnings news, driving Qantas's enfeebled share price up 4.15 percent in Sydney trade to Aus$1.68.

Peter Borkovec, a fund manager at White Funds Management, said investors expected a long-awaited recovery in Qantas's fortunes.

“It's about where the company is coming from and whether its strategy is heading in the right direction,” he said.

“Investors can see it's working, and given Qantas's low valuation you can understand why the market is taking this positively.”

Overall, underlying profit before tax - the airline's preferred measure of financial performance - rose 10 percent to Aus$223

million, on revenues of $8.24 billion.

The group's ailing division Qantas International reported an underlying pre-tax loss in the six months of Aus$91 million, an improvement of Aus$171 million.

“Qantas International is well advanced in its turnaround plan,” group chief executive Alan Joyce told a news conference, crediting a round of cost-cutting including the closure of loss-making routes.

But that improvement included Aus$125 million from the August restructuring of the group's B787 Dreamliner order, with the troubled Boeing plane suffering lengthy production delays. It is now grounded worldwide over a safety scare.

It also included Aus$30 million from the sale of a local unit.

And underlying pre-tax profit for the domestic service was halved to Aus$110 million, in what Joyce called a highly competitive field where rivals have pumped up capacity to claim market share from Qantas.

The chief executive forecast capacity growth of five to seven percent for the airline in the first six months of 2013.

Qantas also announced an order for five new Boeing 737-800s and the upgrade of 20 Airbus A330-200s and 10 A330-300s.

The new Boeings are for domestic service and delivery during 2014, the company said in a statement, adding that leases on two existing B737-800s would be extended this year.

“The refurbished aircraft will give Qantas International a truly world-class product in global aviation's most dynamic and competitive market,” it said.

“Growing with Asia is a major priority for the Qantas Group and this investment underpins our commitment to the region.”

The upgrade will not affect planned capital expenditure of Aus$1.6 billion in 2012-13 and Aus$1.5 billion in 2013-14.

The Asia expansion is a consequence of Qantas's alliance with Dubai-based Emirates, freeing services to Asia from onward links to Europe. The pact was cleared by Australia's competition watchdog last month.

Macquarie Equities analysts say the deal could bring in Aus$240m for Qantas.

New direct destinations from Australia being considered include Beijing, Seoul, Mumbai, Delhi and Tokyo-Haneda at the same time as increasing capacity and frequency of flights to Hong Kong and Singapore. - Sapa-AFP