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Qantas will tweak capacity in wake of good result

February 26, 2018 Headline News No Comments Email Email

Qantas, which last week posted a record profit for the first half despite airfares having fallen to surprisingly low levels, plans to increase capacity on international routes and marginally decrease domestic capacity as the year progresses.

Qantas made AUD 976 million underlying profit before tax (up 15%). The planned capacity adjustments are modest. Qantas expects total Qantas group capacity to increase by about 1% in the second half of financial year 2018. Qantas domestic capacity is expected to fall by about 1%.

The airline expects its international capacity to increase by about 2-3%, which it compares with competitor capacity growth of about 5%. Qantas expects growth in unit revenue to continue on both domestic and international.

Qantas chief executive Alan Joyce said the result had been achieved in the face of challenges – higher fuel costs, a competitive domestic market and international capacity growth.

“Despite that: Qantas Domestic had a record result, Jetstar Group had a record result and Qantas Loyalty had a record result,” Joyce said.

“Qantas International held its own in a market that is producing some extremely low airfares.

“We met – or exceeded – all targets of our financial framework. Debt is towards the bottom of our target range. Every division is returning more than its cost of capital. We generated a record amount of operating cash flow and free cash flow was almost three times higher than the previous first half.

“And we delivered for customers – launching our new Dreamliner, which is getting rave reviews; opening new lounges here and overseas; and starting new routes.”

Joyce noted that Qantas Loyalty was generating record profits.

“We flagged that the interchange reset for credit cards would impact earnings, with a return to higher rates of growth for Loyalty from FY19 onwards.  It’s opening up fresh revenue opportunities by expanding directly into areas like financial services and health insurance.”

Key points in the Qantas half-yearly result:

  • Underlying Profit Before Tax: AUD 976 million (up 15%)
  • Record results for Qantas Domestic, Jetstar Group and Qantas Loyalty
  • Statutory Profit Before Tax: AUD 857 million (up 20%)
  • Statutory Earnings Per Share: 34.0c
  • Return On Invested Capital: 20.9%
  • Record level of operating cash flow; net free cash flow of AUD 772 million (up 2.7 times)
  • Up to AUD 500 million shareholder return: 7 cents per share ordinary unfranked dividend, plus an on-market buyback of up to AUD 378 million
  • Delivery of 18 Airbus A321 NEO LRs (opens in new window) confirmed for Jetstar from existing order of 99 aircraft
  • Upgrade of Sydney International Business Lounge and QantasLink turboprop cabins
  • Plans for Qantas Group Pilot Academy announced.

Written by Peter Needham

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