Many – but not all – Qantas employees will benefit from the airline’s all-time-record profit announced yesterday.
Qantas reported a financial outcome that should silence a lot of critics – an underlying profit before tax of AUD 1.53 billion for the 12 months ended 30 June 2016, the best result in its 95-year history.
“In recognition of their outstanding contribution, around 25,000 personnel across the Qantas Group will be eligible for a one-off $3000 Record Result Bonus (on a full-time basis) if they are covered by an EBA [Enterprise Bargaining Agreement] that includes the 18-month pay freeze outlined as part of the Qantas Transformation program,” the airline announced.
“Combined with the bonus announced in July 2015, this now means more than $160 million in cash rewards has been set aside for non-executive employees in the past two years.”
A source within Qantas confirmed full-time staff would be eligible to receive AUD 3000 and part-time staff $2500 (before tax). For these eligible employees, the bonus would be included in the next available pay.
A Qantas memo said: “If your EBA is yet to be finalised, or is yet to come up for negotiation, the bonus will be paid once an agreement with the wage freeze is finalised. We appreciate that for some people, simply because of the four year EBA cycle, this may not happen until next year. However, if you do become eligible, both the 5% bonus (announced in July 2015) AND the Record Result Bonus will be paid at the same time.
“Both the 5% bonus from 2015 and the Record Result Bonus are discretionary, meaning that it may not be awarded to employees or employee groups who engage in conduct that harms the Qantas Group.
“If you’re eligible for a management bonus, your contribution will be recognised through that payment in coming weeks; you are not eligible for the Record Result Bonus.”
The costs of the discretionary payment will be recognised in financial year 2017, outside of underlying earnings.
The record Qantas performance is a 57% improvement on financial year 2015. Not only can Qantas resume dividend payments and reward 25,000 EBA-covered employees with a one-off cash bonus, it will extend Wi-Fi to Qantas’ regional and international fleets and finalise the network and customer experience for the Qantas Dreamliner.
Fuel costs have fallen but the domestic aviation environment is still volatile and Qantas’ financial achievement is impressive.
- Record underlying profit before tax: AUD 1.53 billion, up 57%
- Record statutory profit before tax: AUD 1.42 billion, up 80%
- Record results for Qantas Domestic, Qantas International, Jetstar Group, Qantas Loyalty
- Near-doubling of earnings per share: 49c, up 24c
- Return on invested capital: 23%, up 6.5 points
- Operating cash flow: AUD 2.8 billion, up 38%
- Net free cash flow: AUD 1.7 billion
- AUD 500m shareholder return: fully-franked 7c per share ordinary dividend and on-market share buy-back
- Additional cash bonus totalling AUD 75 million for 25,000 non-executive employees
- Continued investment in aircraft cabins and Wi-Fi
Qantas chief executive Alan Joyce said the result demonstrated the success of Qantas’ strategy to build a strong, sustainable future for the national carrier.
“Our transformation program is paying dividends for our shareholders, our customers and our employees,” he said.
“Our people can be incredibly proud of what they’ve achieved. It’s thanks to their skill and commitment that we’re announcing a record profit today.
“This was a true team performance, which shows that our strategy is the right one for the tough markets we’re operating in and the long-term opportunities we see ahead of us.
“Transformation has made us a more agile business, created value for our shareholders and given us a platform to invest for the future. Qantas is stronger than ever, but we’re also determined to keep changing and adapting so that we can succeed no matter what environment we’re in.”
Qantas Domestic, Qantas International, the Jetstar Group and Qantas Loyalty all reported record results.
Total underlying EBIT in the domestic market – across both Qantas and Jetstar – was a record AUD 820 million, up AUD 191 million, and total underlying EBIT in the international division was AUD 722 million, up AUD 374 million.
Return on invested capital was 23%, compared with 16% at 30 June 2015, and earnings per share almost doubled to 49 cents.
Qantas Loyalty reported record underlying EBIT of AUD 346 million, up 10%.
Revenue increased by 6.7%, with margins up 0.7 points to 23.8%.
Approximately 45% of the business’ revenue growth in the year came from non-core ventures, while the core consumer and business loyalty programs continued to perform strongly.
Qantas Frequent Flyer members increased by 580,000 to 11.4 million and a range of improved products and partnerships have been announced. An expanded arrangement with Woolworths increases opportunities to earn Qantas Points on every dollar, including grocery and fuel purchases.
Loyalty continues to invest in new ventures and grow the scale of existing ones, taking a strategic stake in Data Republic – a secure data sharing platform – alongside Westpac and NAB, and launching Qantas Assure, a health insurance venture with nib.
The full Qantas announcement can be read here.
Written by Peter Needham