‘Like new’: Qantas announces major upgrade along with $1.4b profit

Qantas has announced plans to spruce up its domestic fleet, including more than 40 Boeing 737s, after sustained passenger demand pushed the airline to register stronger-than-expected half-year profits.

CEO Vanessa Hudson, standing in Qantas’ Melbourne hangar, said the interior of the 42 Boeing 737s slated for upgrades would feel the same as the newer Airbus A321XLR that are to be rolled out in June.

Vanessa Hudson, chief executive officer of Qantas, speaking during a news conference at the company’s hangar in Tullamarine.Credit: Bloomberg

As competition from Virgin builds, Qantas said the cabin upgrade for its domestic workhorse would include new business and economy seats, new carpets, sidewall and lighting.

“It’ll be like new, and it’ll fly alongside the XLR with very the same seats, the same interiors, bigger bins.”

“We want our customers to feel when they step on an XLR or they step on a 737, it feels the same.”

The cabin upgrades will “start as quickly as possible” and will see the 737s through the life of that aircraft, Hudson said.

The seat designs for the Qantas Airbus A321XLR economy class cabin.

The upgrade announcement came as Qantas posted bumper profit for the first half of the financial year.

Underlying net profit for the six months to December 31 landed at $1.39 billion, up 11 per cent compared to the same period. Statutory after tax profit, which included a $65 million increase in legal provision relating to a court ruling, rose to $923 million, or 6 per cent in the same period.

The airline declared it would pay shareholders $250 million in base dividends and $150 million by way of a special dividend, taking its payout for the December half to 26.4¢ a share, fully franked.

It’s the first dividend in six years for Qantas shareholders as the nation’s biggest carrier edges closer to getting back on track after enduring years of scandals and a damning government review.

“We have many retail shareholders,” Hudson said. “This is a fantastic opportunity to share in our profit with them.”

The profit update also came as Federal Treasurer Jim Chalmers on Thursday cleared Qatar Airways’ plan to take a 25 per cent stake in Virgin Australia, a move expected to increase competition on international routes.

“We always said that we welcome competition, and we also said that we won’t go and oppose the results”, which Qantas had expected to land in Virgin’s favour, Hudson said.

Hudson’s confidence about the Virgin-Qatar deal is a marked change from her predecessor Alan Joyce, during whose tenure Qantas had heavily lobbied the government to block outside competition entering the market. Hudson was named CEO in 2023, taking over from Joyce.

With more competition, Qantas is betting on a major cabin upgrade. Pictured: A Boeing 737.Credit: Wolter Peeters

The company said demand remained strong with Qantas and Jetstar’s combined businesses seeing almost 10 per cent more customers in the half year.

“There is a continued strong appetite for demand, both in terms of premium and also low-cost travel,” Hudson said.

The $1.4 billion profit and the dividend were more than what the market had expected, Jarden analysts said in a note to their clients.

Moody’s Investors Service senior credit officer Ian Chitterer said the update was “good” from both an equity and credit perspective.

Chitterer didn’t see the Qatar-Virgin competition as being “material” for Qantas’ overall business.

New international long-haul competition may be negative, but if it brought more passengers into the country, that would support Qantas’ domestic services, which have higher margins, he said.

“The fact that Qantas is saying the outlook is ‘strong’ rather than ‘stable’ is a good result.”

I would say that the demand for low fares has actually come back really strongly.

Qantas chief executive Vanessa Hudson

UBS analyst Andre Fromyhr said it was overall “a solid result with an outlook that may calm some nerves around demand into 2025”.

Investors cheered the result, pushing Qantas shares up 7.1 per cent shortly before noon.

Domestic travel grew by 5 per cent on an underlying earnings before interest and taxes basis for the group. However, average group international fares fell 6.6 per cent as the global market for travel continued to recover in the post-pandemic period.

Qantas is forging ahead with a long-anticipated fleet renewal. Five Airbus A220s serving domestic and short-haul routes were in operation – out of an order for 29.

In total, 11 new aircraft and five mid-life aircraft were added to the fleet in the half. The arrival of Qantas’ first Airbus A321XLR is expected in June along with two A220s.

As Jetstar provides more travel for the growing economy set, Qantas is seeing stronger demand for premium economy.

Hudson said: “I would say that the demand for low fares has actually come back really strongly. And premium leisure came back really, really strongly.”

“We have actually seen the demand for premium travel. .. never being stronger.”

In December, Qantas and the Transport Workers Union reached an agreement in which the airline would pay $120 million in compensation to 1820 baggage handlers who had been illegally laid off, acting against the rules of Fair Work Act.

In a statement, Transport Workers Union national secretary Michael Kaine said: “Qantas is back to making billions, but it has a long way to go to convince Australians that their money’s going to the airline they used to know and love.”

“What Qantas lost sight of in the last decade is that treating your workers with decency is an investment, not a cost.”

Asked about the state of Qantas’ corporate culture since the court finding, Hudson told this masthead the airline’s management has spent “a lot of time listening” both to customers and employees.

“We will act very quickly off the back of that feedback.”

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