Qantas’ half yearly results reveal major profit

After posting almost a half a billion dollars in losses a year ago, Qantas has revealed its huge turn around in new financial figures.

Qantas hasn’t had the strongest 12 months amid profit losses and controversies surrounding sacked staff, customer service issues and flight cancellations — but its latest profit figures show the future of the flying Kangaroo is looking up.

The airline said it was expecting a net profit before tax of $1.35 billion to $1.45 billion in the first half of the 2023 financial year as demand for travel soars.

And it appears it has exceeded its expectations. It has posted $1 billion half-year profit, dramatically turning around its fortunes from a $456 million loss for the same period a year earlier.

The airline returned an underlying profit before tax of $1.43 billion for the first half of FY23 — it had a statutory profit after tax of $1 billion.

Its net debt also declined to $2.4 billion. Qantas said its return to profit comes after three years and $7 billion of cumulative losses due to the pandemic.

Qantas Group CEO Alan Joyce described it as a “huge turnaround considering the massive losses we were facing just 12 months ago”.

“When we restructured the business at the start of Covid, it was to make sure we could bounce back quickly when travel returned,” he said on Thursday.

“That’s effectively what’s happened, but it’s the strength of the demand that has driven such a strong result.”

Qantas Group CEO Alan Joyce. Picture: NCA NewsWire / Dylan Coker

Ticket prices

He addressed rising fares saying it’s due to higher fuel costs.

“But also because supply chain and resourcing issues meant capacity hasn’t kept up with demand,” Mr Joyce added.

“Now those challenges are starting to unwind, we can add more capacity and that will put downward pressure on fares.”

Qantas said fuel costs were up 65 per cent, compared to pre-pandemic levels, while average airfares were up around 20 per cent on 2021 levels.

However, while it is promising a reduction in fares having just announced a huge sale alongside Jetstar, it told investors prices will remain “significantly above financial year 2019 levels”.

“There is going to be peak times when airfares will be high,” Mr Joyce said, noting it happens industry-wide.

“Today is the ninth major sale in the last six months — we have (more than a million) seats for Jetstar below $100 and airfares for Qantas under $400 — nobody can complain that’s not value for money.”

He also noted that while Qantas’ fares are noticeably higher than its competitors, passengers are getting “value for money”.

“Qantas does charge more in the domestic market, because you’re getting more value for money in other areas,” he told reporters at a press conference on Thursday.

“And customers will pay extra to have access to the best lounges around the world, to get high-speed Wi-Fi and free baggage, so you have to look at the value and not just the airfare.”

Staff bonuses

Qantas has dramatically turned around its fortunes from a $456 million loss. Picture: NCA NewsWire / Andrew Henshaw

He also announced Qantas will give 20,000 employees travel credit of $500 and bonuses of up to $11,500 in cash and shares.

“Our people have been absolutely central to our recovery and that’s why we’re so pleased to be in a position to reward them with up to $11,500 in cash and shares, and why we’ve given them another $500 staff travel credit today,” he announced.

“Returning to profit means we can get back to reinvesting for our customers, which is clear from the network, fleet and lounge announcements we’ve made, and from the Project Sunrise cabins we’re previewing. Importantly for our investors, this also sets us up to deliver long term shareholder value.”

$100 million lounge upgrade

The airline revealed this week it has invested $100 million in upgrading its lounge networks both domestically and internationally.

There will be a new first-class lounge in London’s Heathrow Airport that will be opened in line with the airline’s direct flights from the east coast of Australia to the UK.

The new luxury lounge is expected to open in the latter half of 2025, subject to regulatory approval from one of the world’s busiest airports.

It will be the fifth first-class lounge operated by Qantas, joining the ranks of Los Angeles, Singapore, Melbourne and Sydney.

The company’s preferred underlying pre-tax profit measure rose even more, from a loss of $1.3 billion to a profit above $1.4 billion. Picture David Clark Photography

Future of travel

Mr Joyce said on Tuesday the airline’s domestic seat capacity will be back at 100 per cent by June, but it will take until at least 2024 for its international seat capacity to recover, as carriers all over the world scramble for parts and staff

Qantas’ domestic operations delivered $785 million and Jetstar’s $130 million, with margins of 22 per cent and 11 per cent respectively.

On the international front it had underlying (earning before interest and tax) of $511 million as capacity almost doubled from 31 per cent of pre-Covid capacity.

Technology to combat complaints

Following issues surrounding customer service, the airline has introduced new processes at its contact centres which sees more complex bookings escalated to more senior customer service agents.

It is also rolling out new technology in the coming months which will allow it to match complex customer requests with more experienced agents.

The technology will be able to identify customers who have had to call multiple times and match these callers with more experienced agents.

More staff at contact centres

The airline has also hired more than 1000 new contact centre employees in the past year.

News.com.au understands customer service agent error rates have declined by 80 per cent over the last six months.

The airline expects this will continue to fall as it introduces new technology and the airline continues to train its agents.

More cabin crew

Qantas also wants to rehire cabin crew members who took voluntary redundancies or resigned during the pandemic.

“When our airline operations were grounded as a result of the pandemic and we had to stand down most of our workforce, a number of people made very difficult decisions to leave the company,” a Qantas spokeswoman told news.com.au earlier this month.

“Now that we are back in profit and growing again, we’re reaching out to some of these people to see if they’re interested in coming back to the Qantas family.

“We’re also recruiting externally in line with demand for a wide range of roles and we’ve been getting great responses to our recruitment drives.”