Qantas Reports Declining Profits Due to Lower Airfares, Announces Share Buyback Program
Australia’s major airline, Qantas Airways, has announced a decrease in its half-year profits attributed to declining airfares. However, the carrier has also revealed a new share buyback program in an effort to boost shareholder value.
In the six months through December, Qantas reported a statutory net profit of AU$869 million (US$569.1 million), representing a 13% decrease. Despite this decline, revenue saw a substantial increase of approximately 12% to AU$11.1 billion.
To bolster shareholder value, the airline’s board has approved a share buyback of up to AU$400 million, in addition to the outstanding AU$48 million from the previous year’s buyback. Notably, no interim dividend has been declared by Qantas.
The decline in profits can be attributed to lower airfares, which resulted in reduced revenue per available seat kilometer. However, the negative impact was partially mitigated by increased flying and the unwinding of transition costs from the post-Covid restart. While earnings declined in the Qantas Domestic and Qantas International segments, they showed an increase in the discount airline Jetstar and its loyalty business.
Vanessa Hudson, Qantas’s chief executive, acknowledged that airfares had dropped more than 10% since peaking in late 2022, as airlines ramped up operations following the Covid-19 pandemic. Qantas also reported a 25% increase in flying during the half.
Looking ahead, Qantas expects capital expenditure to rise to between AU$3.7 billion and AU$3.9 billion in the 2025 fiscal year. The airline anticipates stable unit revenue for domestic flights and a gradual return to normalcy for international flights as market capacity recovers.
Despite the challenges posed by the pandemic, Qantas has observed strong travel demand across all sectors, with leisure travel leading the way and business travel approaching pre-Covid levels. Hudson emphasized the airline’s efforts to enhance service levels, resulting in a strong recovery in customer satisfaction scores since December. To further improve the travel experience, Qantas is expediting the introduction of Wi-Fi on international flights from late 2024, ordering eight additional A321 XLRs, and investing in digital innovations.
Qantas has been steadfast in its commitment to revitalize operations following the Covid-19 pandemic’s impact on air travel. This rebound in profits comes despite an increase in customer complaints. Notably, the airline’s initiative follows the departure of longtime CEO Alan Joyce, who stepped down amidst legal challenges from Australian regulators accusing the carrier of selling tickets for flights it knew had been canceled.
**Source:** Bloomberg
Analyst comment
Positive news: Qantas reports a substantial increase in revenue despite a decline in profits due to lower airfares. The airline announces a share buyback program to enhance shareholder value. Analyst view: Qantas expects stable unit revenue for domestic flights and a gradual recovery in international flights as market capacity improves. The airline is investing in enhancing service levels, digital innovations, and adding Wi-Fi on international flights. Overall, Qantas is focused on revitalizing operations post-pandemic.
