Five years ago Qantas CEO Alan Joyce was the most hated man in Australian aviation, playing extreme hard-ball with unions in a bitter round of wage negotiations culminating with him sensationally grounding the Qantas fleet for two days in late October, 2011.
Now he could be seen as a saviour with 25,000 ‘non-executive’ Qantas staff, most of them no doubt union members, set to receive a bonus of up to $3000 after Joyce this morning delivered the group’s best-ever financial result – a pre-tax profit of $1.42 billion, up 80%.
Long-suffering investors will also be rewarded with their first dividend in seven years. Highlights include:
- Record underlying profit before tax: $1.53 billion, up 57%
- Record statutory profit before tax: $1.42 billion, up 80%
- Record results for Qantas Domestic, Qantas International, Jetstar Group, Qantas Loyalty
- Near-doubling of earnings per share: 49c, up 24c
- Return on invested capital: 23%, up 6.5 points
- Operating cash flow: $2.8 billion, up 38%
- Net free cash flow: $1.7 billion
- $500m shareholder return: fully-franked 7c per share ordinary dividend and on-market share buy-back
- Additional cash bonus totalling $75 million for 25,000 non-executive employees
- Continued investment in aircraft cabins and wi-fi
CEO Alan Joyce hailed the result as “the best in Australian aviation history, full stop.
“Qantas Domestic, Qantas International, Jetstar and Qantas Loyalty all had record results and increased their margins in financial year 2016.
“Combined earnings across Qantas and Jetstar’s domestic operations reached $820 million, an improvement of 30 per cent on last year.
“That shows the strength of the Group’s dual brand model, even in mixed market conditions with the ongoing economic transition.
“We held the clear leading position in the corporate, SME and leisure markets.
“Both Qantas and Jetstar achieved margin growth.
“Qantas cut the cost gap to our competitor (Virgin Australia).
“As a result, the Group’s share of the domestic profit pool was well above our share of domestic capacity.
“Combined earnings from international flying more than doubled to reach $722 million.
“Qantas International alone achieved underlying EBIT of $512 million.
“That’s a turnaround of more than $1 billion compared with 2014 – a marked improvement.
“Jetstar International also had a strong year, driven by profitable growth on its core Asia-Pacific markets.
“And the Jetstar airlines based in Asia improved their performance by $85 million.
“That includes a first full year profit for Jetstar Japan – which has today announced the next phase of its growth strategy, with plans to grow from 20 to 28 aircraft over the next three years.
“Qantas Loyalty had another very good year, with around 45 per cent of its earnings growth coming from new ventures.
“And Qantas Freight had a solid year in a tough cargo market.
“The key to this result was the benefits each business segment has seen from transformation.
“In total, our transformation program has now unlocked $1.66 billion in permanent cost and revenue benefits.
“We also continue to benefit from lower global fuel prices, with a gain of $664 million secured by the Group’s effective hedging positions.”
Looking ahead, Qantas says “the short-term outlook remains subject to variable factors, including oil price movements, foreign exchange movements and global market conditions.
“Unit revenue is expected to be below the first half of financial year 2016, with competitive industry pricing and resources sector weakness.
“This will be offset by a total unit cost improvement from the Qantas Transformation program and lower fuel costs.”
It intends growing international capacity by 4% while cutting back on domestic capacity by -1%.
“The Qantas Group expects to continue its strong financial performance in the first half of financial year 2017, in a more competitive revenue environment,” Mr Joyce said.
“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.
“The long-term outlook for the Group is positive, with clear strategic priorities and a robust financial framework to deliver for our customers, our people and our shareholders.”