Qantas on track to profit in first half of financial year, CEO Alan Joyce says

QANTAS chief executive Alan Joyce says the troubled airline is on track to return to an underlying profit in the first half of this financial year.

QANTAS chief executive Alan Joyce says the troubled airline is on track to return to an underlying profit in the first half of this financial year.

Preliminary figures indicate the airline achieved an underlying pre-tax profit in the first quarter of the 2014/15 year, Mr Joyce told the Qantas annual general meeting.

“On the back of the hard work of the people of the Qantas Group, we are on track to deliver an underlying profit for the first half of the financial year,” he told the Melbourne meeting.

The guidance reaffirms indications from the airline given in August.

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Qantas suffered an underlying pre-tax loss of $646 million in 2013/14, due to its battle for domestic passengers with Virgin Australia and a record fuel bill.

Mr Joyce said Qantas had now come through the worst, with passenger numbers improving in the three months to September, and returns on domestic airfares improving in the month of September. Growth in airline capacity in the domestic and international markets had slowed, he said.

Qantas CEO Alan Joyce says the airline has now come through the worst.

The benefits from the airline’s $2 billion cost cutting program were also being realised, and a “more benign operating environment” was also proving beneficial, Mr Joyce said.

That includes a lower Australian dollar and a lower oil price over the past six months.

Qantas shares were up 2.75 cents, or two per cent, at $1.4025 at 1205 AEDT.

After years of fighting a crippling domestic capacity war with Virgin, Mr Joyce said market growth would be flat in the first half the 2014/15 year — even less than the one per cent growth he forecast in August.

“International capacity growth in this half is expected to be around 2.4 per cent, that is below underlying demand growth for the first time in five years,” he said.

Mr Joyce added that 4000 of the 5000 job cuts to be made under the company’s transformation program would be made by June 2015, but indicated there may be further sackings.

“The full 5000 redundancies will bring an end to the period of major job reductions,” he said.

Chairman Leigh Clifford said the $2.6 billion writedown on the value of Qantas’ aircraft, which contributed to its $2.8 billion 2013/14 net loss, was made necessary by the accounting treatment of establishing a separate subsidiary for Qantas’s international arm.

Originally published as Qantas on track to profit in first half of financial year, CEO Alan Joyce says