Qantas boasts of best-ever result, but analysts point to weaker second half

A delighted Qantas chief executive Alan Joyce. Pic: AFP

Jubilant Qantas chief Alan Joyce describes the airline’s bumper $1.53 billion underlying full year profit as “the best result in the 95-year history of Qantas and the best result in Australian aviation history, full stop.’’

He adds that the performance “delivers dividends for our customers, our shareholders and our employees’’.

Unusually for CEO rhetoric, that’s all true. Literally, in the case of shareholders, who see a 7c a share dividend for the first time in seven years.

The airline (QAN, $3.49), is also enjoying elevated customer satisfaction, while fulltime employees (bearing in mind there are 4605 fewer of them) will enjoy a $3000 bonus.

The results also show the former bastard case international division almost doubled earnings, as did the mainstay domestic arm. Jetstar — which is spreading its wings as a low cost carrier across Asia — is flying as well.

Throw in a further $366m share buy back and what’s not to like? The answer is a weaker second half disguised by the record-this, record-that full year stats.

According to broker CLSA, only $720m of Qantas’s $1.751bn of EBIT was achieved in the “soft” second half, with this number 7 per cent below consensus expectations. June half earnings were flat on the previous corresponding half.

“Interestingly it is domestic that looks the weakest result in 2H16 so I would expect this shakes some confidence around the (Qantas/Virgin) duopoly,’’ the firm says.

Macquarie Equities describes the full-year number as “solid if slightly better than expected, but with a better cost outlook into 2016-17 than we (and the market) had anticipated.’’

The firm adds: “Qantas remains very cheap in our view and the resumption of dividends demonstrates management’s confidence in the outlook.’’

Joyce flags another $450m of “transformation benefits”, bringing total savings to $2bn.

As for fuel — the airline’s second biggest cost behind labour — Qantas is hedged to the extent that a “worst case scenario” fuel bill in the current year would be similar to last year’s $3.23bn.

Reservations about weakening conditions aside, the re-emergence of a div was enough to send Qantas shares 9c or 2.6 per cent higher.

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