Qantas profit soars to record high as it ends dividend drought

Qantas hands 25,000 of its staff a one-off $3000 “record result bonus” after booking the best profit in its 95-year history.

Qantas aircraft seen at Sydney International Airport. Picture: AAP Image/Joel Carrett.

Qantas has reinstated its long absent dividend after the airline posted a record $1.52 billion profit for the 12 months to June 30.

The airline will reward shareholders with a full-franked dividend of 7 cents a share — equalling $134 million — on October 12 and launch another share buyback totalling $366m.

Qantas (QAN) had not paid a regular dividend since 2009 as it lacked the franking credits to hand over a meaningful payout.

Qantas said its preferred method of returning capital to shareholders in the future would come in the form of more dividends.

Future dividends will be partially franked or unfranked, until the airline’s franking balance — which will fall to $26m after the distribution of this dividend — increases, Qantas said.

The share buyback and the return of the dividend means Qantas will have paid back more than $1.5bn to shareholders over the last 18 months.

The end of Qantas’s dividend drought comes as the airline posted a 57 per cent increase in full-year profit to $1.53bn, the best result in its 95-year history.

The record profit has prompted Qantas to pay about 25,000 of its staff a one-off $3,000 “Record Result Bonus” if they are covered by an EBA that includes the company’s 18-month wage freeze provision.

The bumper profit result was bolstered by a 38 per cent jump in operating cash flow to $2.8bn as the airline’s domestic, international and its budget brand Jetstar all posted record results.

Total underlying earnings before interest for Qantas’s domestic business, including Jetstar, jumped $190m to $820m, while the airline’s international arm increased earnings by $374m to $722m.

The continued depression in global oil prices (a key driver for the cost of jet fuel) continued to be a massive boon for Qantas, which saved $664m for the full year. The second-half savings from fuel however were much lower than the $448m in savings accrued in the first half of the year.

Qantas said it was on track to deliver $2.1bn worth of transformation benefits by June 2017 after it saved another $557m in this financial year.

“Our transformation program is paying dividends for our shareholders, our customers and our employees,” said Qantas chief Alan Joyce.

“Transformation has made us a more agile business, created value for our shareholders and given us a platform to invest in the future. Qantas is stronger than ever, but we’re also determined to keep changing and adapting so that we can succeed no matter what environment we are in.”

Qantas said it planning for a jump in capacity growth of 2 to 3 per cent in the first half of the 2017 financial year driven by its international business which is expected to increase capacity by 4 per cent.

The airline warned that revenue in the first half of the financial year would come in weaker as Qantas continued to battle in a competitive market with Virgin and as airline activity in the resources sector continues its descent.

However, Qantas said any weakness in revenue would be offset by its continued cost cutting programs and lower fuels costs.

“The Qantas group expects to continue its strong financial performance in the first half of financial year 2017 in a more competitive revenue environment. We are focused on preserving high operating margins through the delivery of the Qantas transformation program, careful capacity management and the benefit of low fuel prices locked in through our hedging,”Mr Joyce said.

Fuel costs for the year ahead are expected to be no more than $3.2bn and the airline is expecting to pull out $450m of costs through its transformation program.