Qantas CEO Alan Joyce has issued a profit upgrade for the first half year despite bitter industrial action and rising fuel costs he says cost the company $650m. “Since the termination of industrial action by Fair Work Australia we have seen customers return to Qantas. Domestic bookings, including from corporate accounts, have recovered particularly well and are now back to normal.
“International bookings for the period up to January have also recovered, but at a slower rate because of the longer lead times associated with international travel. Forward bookings for international travel in the second half of the financial year are now in line with normal trends.
“After a very difficult period we are now back to normal operations.”
Mr Joyce says the Qantas Group expects to report underlying profit before tax for the six months ending 31 December 2011 “in the range of $140 million to $190 million… despite a number of challenges.
“The impact of extensive industrial action taken by the Australian Licenced Aircraft Engineers Association (ALAEA), the Transport Workers Union (TWU) and the Australian International Pilots Association (AIPA), and the subsequent grounding of the Qantas domestic and international fleet, is estimated to have had an unfavourable financial impact of $194 million in the first half of FY12.
“This financial impact includes:
“‐ industrial action prior to the grounding: $68 million
” ‐ impact of the grounding (net of cost savings) including lost revenues, refunds and accommodation over three days: $70 million
” ‐ impact on forward bookings of the union campaigns: $27 million
” ‐ customer recovery initiatives in response to industrial action and grounding: $29 million
“In addition to the impact of industrial action, the Group’s first half performance reflects a challenging operating environment, with uncertainty in global economic conditions, elevated fuel prices and volatile foreign exchange rates.
“The outlook for the first half includes the following expectations:
” ‐ Yield (excluding foreign exchange) in the first half of FY12 is expected to be between 3% and 5% higher than in the first half of FY11.
” ‐ Capacity in the first half of FY12 is expected to increase by between 4% and 6% compared with the first half of FY11.
“The first half of FY11 included a reduction in capacity as a result of the grounding of Qantas’ A380 fleet following a Rolls-Royce engine failure.
” ‐ As at November 2011, underlying fuel costs for the first half of FY12 are expected to increase by around $0.45 billion, from $1.7 billion to $2.2 billion, due to higher market jet fuel prices and increased flying. Fuel surcharges, fare increases and hedging are being used to mitigate the impact of fuel price increases but will not fully offset the costs.
“The outlook for the second half of FY12 remains volatile and given the uncertainty in global economic condition, fuel prices and foreign exchange rates, it is not possible to provide further guidance at this time.
“Overall, the Qantas Group’s balance sheet remains strong, with significant flexibility to manage fleet capital in the short-to-medium term and a robust cash balance currently in excess of $3.3 billion. “