Qantas investors not spooked by spate of mechanical defects

Fund managers invested in Qantas say they don’t expect technical faults plaguing the carrier to have a short-term impact on the business – but warn they may if the issues are not resolved.

Fund managers invested in Qantas say they don’t expect technical faults plaguing the carrier to have a short-term impact on the business – but warn they may if the issues are not resolved.

Qantas has been hit with a ­series of technical issues, with five flights turned around in the past week while a sixth experienced an engine failure. All ­affected flights landed safely.

Steve Johnson, the chief investment officer at Forager Funds Management, said Qantas was a “lightning rod of a stock” attracting constant criticism.

“As an investor you need to be really careful to work out what’s going to have an impact on the company’s future profitability as opposed to some short-lived media excitement,” Mr Johnson said. “I think any impact from recent events will be fairly modest but I don’t think anyone would want these things (mechanical issues) to go on for months.”

Investors shrugged off any concerns on Monday, with ­Qantas shares closing unchanged at $6.56. They have risen by 43 per cent in six months as surging travel bookings buoy profits.

In November, the company said it expected underlying profit before tax to come in between $1.35bn and $1.45 for the first half of the year ending June 30, the second upgrade in two months.

But the shine has come off the airline’s performance after several issues starting late last month, when a flight bound for London made an emergency landing in Azerbaijan after smoke was detected in the cargo hold.

On Sunday, a flight from Fiji to Sydney was turned back mid-flight after pilots received reports of fumes in the cabin. It followed another Fiji-bound flight turnback to Sydney on Thursday, followed by three flight diversions on Friday.

On Wednesday, a flight from Auckland to Sydney suffered an engine failure, triggering a mayday call over the Pacific Ocean.

On Friday, the Civil Aviation Safety Authority said it was confident the airline was operating safely. The number of incidents on Qantas planes remains significantly below average.

On Monday, Qantas ­domestic and international chief executive Andrew David said there were “no issues” at the airline and the recent run of incidents was an unfortunate coincidence.

“I’d be more worried about airlines that don’t turn back than the airlines that do in those situations, but they were all completely different,” Mr David told 2GB radio.

“We will investigate each and every one of them. We will find out what the issues were and we are addressing them.

“When we look at our overall fleet health condition we are very, very satisfied our fleet is in good healthy condition.”

He said concerns were understandable, but the turnback of an aircraft mid-flight reflected only “an abundance of caution”, adding: “When they happen at Qantas, we’re proud of how well our ­people deal with them, and that comes back to our safety record and our commitment to training.”

Australian Licensed Aircraft Engineers Association federal secretary Steve Purvinas said the spate of incidents was unrelated, and no reflection of maintenance standards at Qantas. “Although we say that they are short of engineers, that doesn’t mean aircraft fly without being checked properly. It simply limits the amount of flights Qantas puts in the air,” Mr Purvinas said, adding it was unfortunate timing that the incidents happened in succession.

“I understand Qantas would have about 60 aircraft turned back each year as a precautionary measure and there’s no law that would have them spread evenly.”

Australian and International Pilots Association president Tony Lucas said pilots would always err on the side of caution in the event of an issue that posed a threat. “Qantas pilots are well-trained and disciplined,” Mr Lucas said.

Separately, on-time performance data for December released by the Bureau of Infrastructure, Transport and Regional Economics on Monday showed Qantas was the most punctual airline, landing 76.2 per cent of flights on time. Rex was next with 73.2 per cent, followed by Virgin Australia on 67.4 per cent. Jetstar had the worst performance – 62 per cent.