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Qantas Group Profit Drops 13% In H1 FY24

Qantas Group has published its HQ FY24 results, showing a 13% drop in profits partially offset by frequent flyer flights. The airline also revealed the interiors of its QantasLink A220 cabins and announced the introduction of in-flight Wi-Fi on international flights supported by Viasat satellite connections. Qantas also reported delays in A350-1000 deliveries, which will push back the launch of its Project Sunrise flights by six months.

Qantas A350-1000 delayed, as Qantas Group announces profit for H1 FY24 and plans for fleet.
A350-1000 Qantas

Qantas Group H1 24 In Brief

  • Underlying Profit Before Tax: $1.25 billion (down 13 percent)
  • Statutory Profit After Tax: $869 million (down 13 percent)
  • Statutory earnings per share: 52 cents (down 4 percent)
  • Net debt: $4.0 billion
  • Additional on-market share buy-back of up to $400 million was announced.
  • Fares are falling as capacity continues to normalize; restart costs are unwinding.
  • Significant improvement in customer satisfaction; more work to do.
  • Capital expenditures are rising in FY25 to between $3.7–3.9 billion.
  • 8 additional A321XLRs are on order for Qantas Domestic.
  • Acceleration of Qantas International Wi-Fi from the end of the 2024 calendar.
  • $500 staff travel credit for around 24,000 employees.

Profit Declines in H1 FY24

In the first half of FY24, the Qantas Group reported an Underlying Profit Before Tax of $1.25 billion. This figure marks a 13 percent decline compared to the same period in FY23, as airfare prices and available seating capacity stabilized.

The drop in average earnings per seat per kilometer, amounting to a $600 million hit to profits, played a significant role in the lowered earnings [1]. Additionally, freight revenue suffered a $146 million decrease. However, these losses were partially offset by a $485 million boost from more frequent flights and $179 million from cost savings related to the industry’s post-COVID recovery.

The company slashed its unit costs by 5.2 percent year over year, not counting fuel expenses. It expanded its operations by 25 percent in available seat kilometers and welcomed 3.3 million more passengers than in the previous year’s first half.

Strong travel demand endures across all market sectors, with leisure travel in the lead and business travel nearing the levels seen before the pandemic. Data shows Qantas Frequent Flyers exhibit a sharp increase in their intent to spend on travel over the next six months, outpacing their planned spending in most other significant categories [2].

Qantas Group Investing in Customers and People

Today, the Qantas Group announced a series of impressive customer-centric investments. Highlighting the announcement is the reveal of the interior designs of their new A220 aircraft. Furthermore, the Group is speeding up the deployment of Wi-Fi services on international flights and enhancing its digital platforms significantly.

Qantas has introduced a lucrative promotion for its loyal Frequent Flyers that awards double the usual points and status credits, which customers can explore through their latest offer. This promotion joins the ongoing fare sales for domestic and international routes that the airline regularly offers.

Investing in its workforce remains a top priority for the Group. With ongoing recruitment and training initiatives, Qantas ensures its new aircraft not only advance passenger experiences but also open doors for career growth and skill development for its staff. Promotions and new job prospects often accompany such fleet expansions.

In recognition of the hard work of its 24,000 non-executive employees, Qantas demonstrates appreciation by offering each of them a $500 staff travel voucher. This bonus will help the employees save even more on already discounted standby tickets available exclusively to Group staff, their families, and friends.

Qantas Group CEO Comments On First Half Performance

Qantas Group CEO Vanessa Hudson said: “We know that millions of Australians rely on us, and we’ve heard their feedback loud and clear.

“There’s a lot of work happening to lift our service levels, and the early signs are really positive. Our customer satisfaction scores have bounced back strongly since December and we have more service and product improvements in the pipeline.

“Having the financial strength to keep investing is key, and that makes the strong performance that all business units had in the first half so important.

“We understand the need for affordable air travel, and fares have fallen more than 10 percent since peaking in late 2022. At the same time, we’ve seen a cost benefit from fewer cancellations and delays and scale benefits as more international flying returns.

“Our people have been instrumental in the initial recovery we’re seeing, and I thank them sincerely. The journey we’re on will take time, but the spirit they are bringing is fantastic and it’s made us optimistic about what we can achieve together.

“I want to thank our customers and our partners for their support as we keep working to make the Qantas Group an organization that everyone is proud of. We need to deliver a service that is consistently better in order to succeed long term, and that’s what we’re focussed on,” added Ms Hudson.

Domestic Performance Qantas Group

Qantas Domestic has ramped up its flights by 5 percent in the first half of 2024 [3], catering to the surge in business travel. This increase reflects the sector’s resilience, with premium leisure and resource-based travel demands staying robust. Customer satisfaction scores have risen substantially since December, even as the airline successfully preserved its market share.

The surge in flights translated into a revenue boost of approximately 3 percent. Despite this growth, the airline witnessed a decline of 18 percent in its Underlying Earnings Before Interest and Taxes (EBIT), landing at $641 million. This figure, however, still significantly surpasses the pre-pandemic levels seen in Fiscal Year 2019.

Qantas Domestic faces pressure from escalating airport and security charges, which outpace inflation rates. Moreover, the company is investing more in enhancing the customer experience. Nonetheless, costs related to the post-COVID restart are diminishing, and operational improvements are driving greater efficiency across the board.

Jetstar Domestic has made notable strides, charting an impressive increase in performance. By resolving supply chain issues, minimizing operational disruptions, and increasing its flights by 15 percent, the airline’s Underlying EBIT has jumped by 35 percent to reach $175 million.

Qantas Group International and Freight

Qantas International boosted its flight capacity by an impressive 39 percent in the first half of 2024 [4]. The airline welcomed an additional A380 and rolled out a new Boeing 787. This expansion marked the return of all pre-COVID routes and introduced new destinations, such as a direct flight from Perth to Paris. Thanks to scaling up operations, the airline saw a drop in unit costs, making their services more economical.

Jetstar, Qantas’s subsidiary, saw an international flying surge of 38 percent compared to the same period in 2023. New connections, like Melbourne to Fiji and Brisbane to Tokyo, alongside a rebound in the Japanese and Singaporean markets, fueled this growth. With robust demand for leisure travel and better operational reliability, Jetstar’s financial health flourished, pushing its Underlying EBIT to a $150 million high despite a general leveling off of fares.

Domestic freight operations remained solid, anchored by strong e-commerce activity and an upgraded Qantas Freight fleet. In contrast, international freight faced a downturn due to broader economic pressures and increased capacity on key routes, resulting in freight revenue sliding by about $200 million. Nonetheless, the revenues per unit remained robust, staying approximately 150 percent higher than before the pandemic.

However, the freight market’s volatility was the primary factor causing a 31 percent decline in the Underlying EBIT for the Qantas International division, which includes Freight operations.

Qantas Loyalty Program

Qantas Loyalty saw impressive growth, expanding its membership base to 15.8 million. It achieved this by adding several major partners to the program. Moreover, earnings from Qantas Hotels and Holidays bookings soared by approximately 30%, and TripADeal bookings surged by more than 60%, outperforming the first half of 2023.

The company also reported significant advancements in its insurance offerings. The take-up of Qantas-branded home and motor insurance policies skyrocketed, multiplying 2.5 times higher than in the first half of 2023. Financial services witnessed an upswing, too, with over 100,000 new credit card sign-ups and a 4% rise in the value of purchases made on cards that earn Qantas Points.

Qantas Loyalty’s Underlying EBIT climbed by 23%, hitting $270 million. This robust performance enabled the company to meet its $500 million annual earnings target six months ahead of its planned schedule.

Currently, Qantas Group is finalizing enhancements to the Frequent Flyer program. These improvements mark a significant investment in member benefits and are set to be announced by April.

Qantas Group Fleet and Sustainability Update

During the first half of 2024, the Group expanded its fleet by acquiring eight new and mid-life aircraft, signaling a significant acceleration in its fleet renewal initiative. The company anticipates the arrival of an additional 14 aircraft in the second half of the year.

  • Qantas Domestic secures 8 more A321XLR aircraft, bringing their total to 28, as a strategy to upgrade from their 737 fleet.
  • Network Aviation boosts its capacity for the resources sector by purchasing 4 additional A319s, with a plan to base them in Western Australia. These will join the fleet in stages throughout 2024.
  • Manufacturing delays push the delivery of Qantas Domestic’s first A321XLR to early 2025, a three-month shift.
  • Similarly, Qantas International’s A350 arrival, the key to Project Sunrise, now rescheduled for mid-2026, suffers a six-month delay.

Jetstar’s newly acquired A321LR aircraft are making remarkable strides in efficiency with a 20 percent enhancement in fuel burn per seat. This advancement is critical in driving down operational costs by 12 percent compared to the older A320s. These developments align seamlessly with the Group’s commitment to slash emissions by 25 percent [5] by 2030, marking significant progress toward their ambitious environmental goals.

Qantas Group Financial Framework and Shareholder Returns

The Group wrapped up the semester with a strong liquidity position, boasting $9.2 billion. This sum includes $1.5 billion in cash, $1.4 billion in available credit facilities, and $6.3 billion in assets free from any liens.

As of December 2023, the Group’s net debt climbed to $4.0 billion. This increase came as the company welcomed new aircraft, normalized its advance revenue collections, repurchased shares worth $452 million, and rewarded approximately 20,000 employees with bonuses. The net debt has now hit the lower end of the Group’s target range of $4.0 to $5.0 billion. Forecasters expect the debt level to rise mid-range as the Group seeks the most effective use of its capital.

The Board has greenlit a shareholder return plan valued at up to $400 million through an on-market share repurchase. This plan is in addition to the remaining $48 million share buy-back previously announced.

Once Qantas finalizes the planned improvements to its Frequent Flyer program and announces the financial implications, it will kick off the buy-back. These enhancements to the program aim to raise member value substantially and fuel long-term growth for the Qantas Loyalty program. Qantas Loyalty is set on reaching an Underlying EBIT between $800 million and $1 billion by the fiscal year 2030.

Qantas Group Outlook for FY24 

The Group reports a robust demand for travel throughout its portfolio. Experts predict a consistent revenue per unit for domestic travel and an international revenue normalization as market capacity increases. For the rest of FY24, here are the key projections and predictions:

  • Travel enthusiasm within the Group’s offerings remains high.
  • Domestic revenue per unit is likely to stay consistent.
  • The international market is expected to stabilize as capacity returns to normal.
  • The remainder of FY24 incorporates specific expectations, summarized for clarity.
    • FY24 fuel cost is expected to be $5.4 billion at current fuel prices, including hedging.
    • FY24 net capital expenditure is expected to be $3.0–3.2 billion.
    • FY24 depreciation and amortization are expected to be $1.8 billion.
    • Targeting transformation initiatives (mix of efficiency and revenue benefits) of approximately $400 million in FY24 to offset the impact of CPI.
    • Net debt is expected to be at or below the middle of the target range by the end of FY24.

Qantas Group Capacity

With capacity returning to pre-COVID levels, the Group will revert to using the immediate prior year as the baseline for reporting capacity rather than FY19.

Notes:

[1] Ticketed passenger revenue divided by ASKs.

[2] Based on a monthly survey of ~2,000 Qantas Frequent Flyers.

[3] Compared with 1H23.

[4] Compared with 1H23.

[5] Compared to 2019 levels.

Qantas Group Quarterly Performance Tables

ASKs (vs prior corresponding period)3Q244Q242H24FY24FY24 (% of pre-COVID1Q251Q25 (% of pre-COVID)
Group Domestic +7%+3%+5%+7%103%+2%105%
  Qantas Domestic+2%(3%)(1%)+2%98%(1%)99%
  Jetstar Domestic+17%+15%+16%+15%112%+7%115%
Group International (ex. JSA)+32%+23%+27%+33%94%+19%102%
  Qantas International+33%+20%+26%+32%86%+16%90%
  Jetstar International (ex. JSA)+30%+28%+29%+34%119%+25%141%
 Jetstar Asia (JSA)+53%+42%+48%+34%42%+78%59%

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