Qantas CEO posts healthy first half profit and outlines plan to rebuild trust
Qantas CEO Vanessa Hudson has outlined what it will take to rebuild trust in the airline as she delivered a $1.25bn half year profit.
New Qantas chief executive Vanessa Hudson says trust in the airline will not be fully restored until an ACCC lawsuit on ghost flight ticket sales is behind them, as she delivered a healthy half-year profit of $1.25bn in her first financial result in the top job.
In what seemed like a deliberate attempt to further distance herself from predecessor Alan Joyce, Ms Hudson took the results announcement out of the boardroom and into an airport hangar full of employees on Thursday.
She said she wanted the engineers, cabin crew, pilots and customer service staff to be involved in the process, and see her answer “tough questions” from the media present.
“It’s about being transparent and being accessible,” Ms Hudson said.
Her first profit for Qantas was not a record, at 13 per cent below the previous corresponding period, and reflected moderating airfares and greater spending on customer initiatives.
Net profit came in at $869m, 13.2 per cent lower than last year’s $1bn result, even as revenue climbed from $9.9bn to $11.1bn.
Tellingly in a cost of living crisis, low fares partner Jetstar saw a massive 83 per cent jump in earnings for the six months to December 31 to $325m on the back of strong demand and more flying.
Qantas Loyalty also saw profits swell from $220m to $270m, while Qantas Domestic and International saw earnings reverse as a result of lower airfares and rising costs.
Ms Hudson said $90m had been spent on customer improvements in the period, with another $140m slated for the second half. Much of that would go towards accelerating the rollout of high-speed Wi-Fi on international flights, an upgrade of digital technology, and an increase in frequent flyer rewards.
She was adamant court actions involving Qantas would not impact on this spending, with the airline facing a potential $250m fine for selling tickets on already cancelled flights, and a big compensation bill for illegally outsourcing the jobs of ground handling workers.
Mediation to determine compensation failed to resolve the dispute with the Transport Workers Union, setting the stage for another court battle next month.
Ms Hudson personally attended the mediation and said she was “really disappointed” an agreement could not be reached.
“I felt we put a fair and reasonable offer on the table and a settlement would’ve been the fastest way for the former employees to have received their compensation but nevertheless the court process to determine that settlement is going to occur next month, and so that’ll bring a conclusion,” she said.
An Australian Competition and Consumer Commission lawsuit was also due back in court soon, and Ms Hudson indicated a settlement could be on the cards.
Although she remained adamant Qantas had left no customer out of pocket when it allegedly sold tickets on already cancelled flights, she was eager to wipe the slate clean.
“I know that to restore trust in the Qantas brand we need that matter behind us and we’re working through the legal process in the courts at the moment,” she told The Australian.
Airfares had fallen 10 per cent since December 2022, and further “normalisation” was expected on international routes in particular.
It was also revealed long anticipated Project Sunrise flights, non stop from Sydney to New York and London, would be pushed back another six months due to a delay in certifying new A350-1000s.
The addition of an extra fuel tank to the aircraft to make the ultra-long flights possible was yet to be signed off by the European Aviation Safety Agency, with the first A350 now expected to arrive in mid-2026 instead of next year.
Ms Hudson denied she was frustrated by the setback, insisting the business case for the services remained solid.
“The demand we’re seeing from customers who want to fly point-to-point its stronger than ever,” she said.
“We’re seeing that on our services from Perth to London, Perth to Rome and the uptake of the new services from Perth to Paris, so we’re very confident the business case still stands and the six month delay is not a concern.”
Analysts took a mixed view of the first half results which included a $400m share buyback and no dividend, and limited full year guidance.
Citi research analyst Samuel Seow said it was assumed the second half would be softer, which meant earnings would likely fall short of initial FY24 targets.
Andre Fromyhr of UBS described the earnings as “a touch disappointing” but said there were no major surprises in the forward signals.
“The revenue and demand environment looks robust, fuel looks a bit better and Loyalty narrowed to the lower half of previous range,” said Mr Fromyhr.
Portfolio manager at Milford, Jason Kururangi said it was good to see the business able to deliver a solid set of financial results “after a horrible year reputationally for the company”.
“On the qualitative side it is especially positive to see the business looking to improve customer outcomes, including looking at cash refunds for Covid flight credits which is another step to repairing their brand with consumers,” said Mr Kururangi.
“It is also good to see further investment in their fleet both through additional aircraft and improving in-flight customer experience via additional Wi-Fi connections on long haul aircraft.“
Unions were less positive, calling on Ms Hudson to share the bumper profit with the airline’s 24,000 workers beyond the $500 in staff travel credit provided.
ASU assistant secretary Emeline Gaske said Qantas employees had made significant sacrifices including enduring a two-year wage freeze, and deserved to be appropriately recognised for their contribution to the profit result.
TWU national secretary Michael Kaine said the “obscene” $1.25bn profit showed Qantas was well-placed to pay compensation to illegally outsourced workers.
“At upcoming compensation hearings for illegally sacked workers, we need to see genuine remorse from Qantas and a willingness to quickly and appropriately pay for the devastation caused, without further delay tactics,” Mr Kaine said.
Qantas shares tumbled on the back of the result, closing 6.8 per cent down at $5.21.
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