For the first time since 2019, Qantas Airways (ASX:QAN) Ltd is back in profit on a full-year basis, today reporting annual profit of $1.7 billion — a sizable turnaround from the $860 million loss reported a year ago.
Underlying pre-tax profit came in at $2.47 billion, a major improvement on the A$1.86 billion 2022 loss and “a world away from the $7 billion in statutory losses we racked up during COVID,” said Qantas chief executive Alan Joyce.
Joyce said that the result showed “a substantial turnaround in both our finances and service over the past year. Flight delays and cancellations have largely returned to pre-COVID levels and we’ve shifted from heavy losses to a strong profit and pipeline of investment worth billions of dollars.”
eToro market analyst Josh Gilbert observed: “Qantas is reaping the rewards of travel being in a ‘sweet spot’ of robust demand, with airfares sky high and low costs translating into higher margins and growing its bottom line. The business is flying high and the market believes growth will continue in FY24, albeit possibly at a slower pace than what we’ve seen this year.”
Further $500 million buyback announced
The group announced it will return a further $500 million to shareholders via an on-market buyback starting next month. This expands on the $1 billion in returns it made to shareholders in 2023, when it bought back shares at an average price of $6.19.
However, shareholders might be disappointed that dividends have not been reinstated after they were axed during the pandemic.
Strong balance sheet to underpin returns
Qantas has also displayed balance sheet strength, with its $2.89 billion in net debt coming in lower than the targeted range, and was down on its financial year 2019 level of $4.7 billion. The airline said that this, combined with “cashflows from what is a structurally enhanced business, is expected to underpin future aircraft deliveries and shareholder returns”.
Qantas also revealed that to replace its ageing fleet it has made a “multi-billion-dollar order” for 12 Boeing (NYSE:BA) 787 Dreamliners and 12 Airbus A350s, which should be delivered in the 2027 financial year.
The airline says that while domestic flights are already back above pre-COVID capacity, it does not expect international flights to return to pre-pandemic levels until the second half of next year.
Gibert commented, “The big question now is; how long will this surging demand last? Travellers have been looking to take advantage of the world opening back up and are refusing to give up their holidays.
"However, discretionary spending is being challenged as the cost of living bites with inflation and interest rates near decade highs.
"Qantas, however, clearly believes that demand will continue, ordering 24 new planes to meet demand and saying demand will remain above pre-COVID levels.”
Not without criticism
Having delivered a record annual profit, the airline is facing pressure to justify its robust profit margins, which exceed pre-pandemic flying levels. It has also been criticised for the $2.7 billion in taxpayer handouts it received during the pandemic.
The group record profit result today follows the lodgement of a class action against Qantas on Monday by Echo Law for not refunding tickets for cancelled flights during the COVID-19 pandemic, claiming it was against Australian consumer law. Joyce will appear before the Senate on Monday.