Qantas completes $500m buyback

The airline has returned $1bn in 12 months, but is yet to reveal future capital management plans.

Qantas has completed its $500 million share buyback but will keep investors waiting for another two months before revealing what its next plans are for capital management.

The completion of the share buyback means that the nation’s No. 1 airline has returned $1 billion to shareholders in the past 12 months after handing over $505 million to shareholders in the form of a 23c-a-share distribution in August last year.

The buyback — which kicked off in March after Qantas posted a bumper profit result — has seen some 143.6 million shares bought back for a weighted average price of $3.4819 per share.

The highest price paid was $4.21 per share on April 4, while the lowest price paid was $2.91 on June 6.

Qantas shares today are trading down 3.3 per cent at $2.90.

The buyback means that the number of ordinary shares on issue for Qantas has decreased by 12.6 per cent since 30 June 2015.

But the airline will keep investors guessing until August on how it will deliver more capital returns in the future.

“A decision on future capital management initiatives will be made by the board and announced with the group’s full year results on 24 August 2016,” Qantas said.

The statement reiterates comments from Qantas chief Alan Joyce who earlier this month said the airline’s board would decide in August if it had the capital ­capacity to reintroduce regular dividend payments to shareholders next year.

“The group has reached its optimum capital structure. We’ve got our investment-grade credit rating back. We are generating a lot of free cash,” Mr Joyce said on the sidelines of the International Air Transport Association annual meeting in Dublin earlier this month.

“The board will get together at the end of the full year and look at the appropriate ways of capital management. All the options are still on the table, and the company will look at if it’s optimal to issue a dividend or if it’s optimal to do ­another buyback.”

Qantas is slowing building up cash reserves, having pulled in $1.4 billion in operating cash and $770m in free cash during the first half of this financial year.

But it has not paid a regular dividend since 2009 and lacks the franking credits to hand over a meaningful dividend. Instead, the airline has preferred to return capital to shareholders in the form of a share buyback.

Mr Joyce indicated this could change as the company continued to whittle away its tax losses of almost $2bn, a hangover from its writedown-heavy $2.8bn loss in 2014.

“The dividend situation relates also to our position on franking credits. We have the ability to issue around a 9c dividend with the franking credits we have. Given the cumulative tax losses, particularly going back a few years, we are rapidly going through them because the company is making good profits,” he said.

“We will be back in a position of paying cash tax with the corporations tax — by the way, we pay a hell of a lot of taxes — and that will allow us the consideration about paying a sustainable franked dividend going forward.

“We continue to be very positive about capital management given the cash position and cash flows of the company, but it’s a board decision that will take place in August.”