Qantas taxiing for tax takeoff: Alan Joyce

Alan Joyce says the airline will likely start paying tax again next year, as analyst says “sizeable” investment in fleet required.

Qantas CEO Alan Joyce on the tarmac at Mascot Airport. (Renee Nowytarger/The Australian)

Qantas Airways chief executive Alan Joyce has said the airline will likely start paying corporate tax again next year, amid plans to invest significantly in new aircraft to fly non-stop from Australia’s east coast to Europe. The comments come as a new report suggests the airline will need to make a “sizeable” investment in its fleet of aircraft.

Mr Joyce said that the company (QAN) has $950 million left in tax credits, stemming from $2.8 billion in losses the company posted in the 2013 fiscal year.

“Last year we made $1.4bn, if we make that again this year, we’ll be paying tax again next year,” he said.

It comes after the ABC reported that Qantas hasn’t paid company tax for close to 10 years and that Mr Joyce is a vocal supporter of the Turnbull government’s push to cut the rate of business tax.

“What I’m worried about is that what will happen in the US with the lower tax rate and a better tax system is that we will lose investment from Australia,” he said.

“That will mean that the economy will here will struggle compared to the rest of the world, that will mean that Qantas and other companies won’t do as well.”

Speaking on Radio National this morning, Mr Joyce confirmed that Qantas is spending $1.5bn to $2bn on new aircraft, which would be a huge concession under US President Donald Trump’s new tax arrangements, which an American airline would benefit from.

“We’re depending on big business, we’re depending on small business doing well in Australia and if we’re not competitive globally, that will result in the company not performing and not paying the taxes that we want to be paying,” he said.

Mr Joyce said that Qantas has been able to recruit about two thousand people in the last few years because the business is doing well.

The comments come as S&P Global Ratings says Qantas will need to make a “sizeable” investment in new aircraft just as it resumes paying company tax again and despite its recent investment in the Dreamliner.

The report argues that aircraft investment by Qantas has been “subdued” in the last few years.

“Qantas may face a sizeable fleet-funding task at an inopportune time,” says credit analyst at S&P Global Ratings Graeme Ferguson.

“That’s because the airline’s investment in new aircraft may coincide with the resumption of company tax payments.”

According to the report, the average age of aircraft in the Qantas fleet has been “steadily rising”.

“Reduced aircraft investment, past writedowns, and past tax losses can provide a temporary boost to short-term financial performance,” the report says.

“We believe this is part of Qantas’ turnaround story alongside its successful transformation program.”

In response to the S&P report, Qantas said in a statement that its fleet was “constantly under renewal and is competitive in every market we serve”.

“Our ability to meet our long term capital expenditure needs are clear,” the statement said.

“Our balance sheet is as strong as it has ever been, our debt levels are towards the bottom of the target range and we have an aircraft order book with a lot of flexibility.

“Around 60 per cent of our existing aircraft are debt free and our recent aircraft pruhcases have been in cash because our business is performing strongly.”

Yesterday, Qantas put out a statement calling the suggestion that the company can’t argue for tax cuts because of financial losses “nonsense”.

“And it ignores the benefit to the broader economy that lower tax rates will bring,” Qantas said.