Qantas takes off with record profits

TD Guest Writer

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Qantas generated record profits in the 2016 financial year
Qantas generated record profits in the 2016 financial year

Qantas has reported a sharp rise in its full-year profits, driven by the airline’s turnaround plan and lower fuel costs.

For the 12 months to 30 June 2016, the Australian national carrier posted a record pre-tax profit of AU$1.53 billion (US$1.17bn), up 57% compared to the previous financial year. Qantas Domestic, Qantas International, Jetstar and Qantas Loyalty all achieved record results, and the group’s cash flow has now increased 38% to AU$2.8bn.

Alan Joyce, group CEO, attributed the result to the results of the airline’s ‘Qantas Transformation’ programme – a AU$2bn cost reduction effort that began in 2014.
“Our transformation programme is paying dividends for our shareholders, our customers and our employees,”

Joyce 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,” he added.

2016’s record performance marks a dramatic turnaround for Qantas; in 2014 the airline posted a full-year loss of AU$2.84bn – the worst in its history. At the time, Joyce said Qantas was experiencing “the toughest market conditions it had ever faced”.

Alan Joyce
Alan Joyce

But just two years on, the combined impact of the turnaround strategy and favourable fuel prices has allowed Qantas to revive its business.

The Transformation programme has driven AU$1.66bn in permanent savings since early 2014, including AU$557 million in the 2016 financial year 2016 alone. In addition, Qantas’ saved AU$664m this year from lower global fuel prices compared with last year. It noted that a “proportion” of these savings have been passed onto consumers through lower airfares.

Qantas Domestic reported record EBIT (earnings before interest and tax) of AU$578m, up 20% year-on-year, while Qantas International’s EBIT jumped 92% to AU$512m. Jetstar saw a similarly impressive improvement, rising 97% to AU$452m.

Looking ahead, Qantas said it expects to see further benefits from its Transformation plan in 2017, while capacity will be increased by 2-3%.

“The Qantas Group expects to continue its strong financial performance in the first half of financial year 2017, in a more competitive revenue environment. We are focused on preserving high operating margins through the delivery of the Qantas Transformation program, careful capacity management, and the benefit of low fuel prices locked in through our hedging,” Joyce said.

“The long-term outlook for the Group is positive, with clear strategic priorities and a robust financial framework to deliver for our customers, our people and our shareholders.”
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