Qantas vows to make even more money after record $1.74bn profit for FY23
Qantas CEO designate Vanessa Hudson says a record profit is ‘not as good as it gets’, after passengers spent nearly $17bn in the last year.
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High airfares and a brutal cost-cutting program have helped Qantas deliver its biggest full-year result on record, a $1.74bn net profit, but CEO-designate Vanessa Hudson says it can do better.
Delivering her last result as chief financial officer before stepping into the top job, Ms Hudson said the $2.6bn turnaround on last year’s $860m loss was “not as good as it gets”.
Even with fares moderating and capacity increasing, Ms Hudson was confident that the $1bn in costs taken out of the business under its pandemic recovery plan would ensure a more profitable operation in the years ahead.
“All of the work we’ve done during Covid-19 in terms of restructuring our cost base, we are going to see that as fares come down and capacity comes back, our cost position is going to improve materially going forward,” said Ms Hudson, who will take over from Alan Joyce in November.
“Therefore we are expecting the future earnings potential of our business is going to continue to grow.”
The underlying profit of $2.47bn represented a $4.3bn improvement on the 2022 result, setting another new benchmark for the 103-year-old carrier.
In the 12 months to June 30, Qantas passengers poured almost $17bn into the airline, paying around 57 per cent more for international airfares than pre-Covid, and 34 per cent more for domestic.
The high prices saw Qantas International make $906m and jump from being the least profitable part of the business in 2019, to the second biggest earner after Qantas Domestic, which pulled in $1.3bn.
Qantas Loyalty was third with earnings before interest and tax of $451m, aided by the take-up of about 250,000 points-earning credit cards.
And low fares carrier Jetstar turned the prior year’s loss of $796m into $404m in earnings, with the help of 37 per cent growth in ancillary revenue collected from passengers for things like baggage, food and seat selection.
Mr Joyce lauded the “remarkable turnaround” of the airline group, which last made a full-year profit in 2019. He said the result was three years in the making, and it had been hard.
“From being 11 weeks shy of insolvency to a challenging return to flying across the industry to finally getting back to the leading domestic operational performance, it is an absolute credit to the resilience and hard work of our people, the patience and understanding of our customers and the support of our shareholders,” he said.
Domestic capacity was now back to pre-Covid levels, and international flights would get there by mid-2024, putting downward pressure on fares, Mr Joyce added.
He also delivered the final plank in the airline’s much-needed fleet renewal: an order for 24 new widebody aircraft to replace ageing A330s and eventually the A380 fleet.
The 12 Boeing 787-9s and 12 A350s would start to arrive in 2027, providing greater flexibility and efficiency for Qantas with their long range and lower fuel burn.
Another 12 A350-1000s were on order for ultra-long-range Project Sunrise flights, due to start in late 2026 or 2027.
“This is my last full year results as Qantas CEO,” Mr Joyce said.
“It’s been extremely challenging but I’m pleased to say the future of the national carrier is on solid ground.”
There was little movement in the Qantas share price in response to the announcement, which was within the profit guidance range flagged in May.
At the close of trade on the ASX, Qantas shares were up 5c, or 0.8 per cent at $6.22.
Analysts found much to like about the results, noting the balance sheet remained strong, net debt was down to $2.89bn and Qantas had a healthy $10bn of liquidity including $4.4bn in cash.
Moody’s Investors Service vice president Ian Chitterer said the airline’s credit profit had “never looked stronger”.
“We thus consider that Qantas will remain well positioned, even if the currently strong outlook for travel demand deteriorates,” said Mr Chitterer.
UBS analyst Andre Fromyhr said the market was more concerned about the outlook into 2024.
“On that front, if the company can build confidence in the resilience of demand and stability of the cost base, then the market may start to put a higher probability on Qantas hitting its 2024 financial year targets and sustaining its current earnings run rate for longer,” Mr Fromyhr said.
Union reaction was less effusive, although pilots were happy to see the fleet rejuvenation plans mapped out. Australian and International Pilots Association president Tony Lucas said the new 787s and A350s would provide “new opportunities for promotion”.
ACTU national president Michele O’Neil said Qantas was “hell bent on driving down terms and conditions for its workers to maximise profits”.
“Our flagship carrier, with these kinds of profits, should be respecting their workforce,” said Ms O’Neil.
“Qantas workers deserve secure jobs and fair pay and conditions for the hard and important work they do to keep us all safe. Instead on some Qantas domestic flights, you see the cabin crew on five different rates of pay on the same plane, all for doing the same job.”
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Originally published as Qantas vows to make even more money after record $1.74bn profit for FY23