Qantas Sees First-Half Profit Rising on Lower Fuel Prices

  • Forecasts underlying pre-tax profit as high as A$925 million
  • First-half earnings are in line with analyst estimates

Qantas Airways Ltd. said it expects first-half earnings to more than double as Australia’s national carrier benefits from lower fuel prices, a cost-cutting strategy and revenue growth across its international and domestic operations.

Underlying profit before tax for the six months ending Dec. 31 is expected to be between A$875 million ($634 million) and A$925 million, the airline said in a statement Tuesday. That compares with A$367 million reported a year earlier and the A$885 million mean estimate of three analysts surveyed by Bloomberg.

“Qantas management worked very hard over the last couple of years to reduce costs to extricate themselves from a difficult period and get themselves into this position,” said David Liu, who helps oversee A$450 million including Qantas shares as head of research at Above the Index Asset Management Pty in Sydney.“In a low oil price environment, if they are able to manage expenses and capacity appropriately, then we’d see them improving profitability.”

Cost reductions, aided by a tumbling oil price, helped deliver in August the airline’s strongest full-year earnings since Chief Executive Office Alan Joyce took over in 2008. The Sydney-based carrier regained its investment-grade credit rating for the first time in two years last month, while it handed back A$505 million to shareholders.

Qantas shares rose 2.4 percent to A$3.87 at 10:15 a.m. in Sydney. That extends this year’s gains to 52 percent, compared with a 9 percent decline for the benchmark S&P/ASX 200 index.

“We’ve seen improved revenue in our domestic and international operations, reduced costs across the group through the Qantas Transformation program, and expect another record half-year result from Qantas Loyalty,” Joyce said in the statement, referring to the airline’s frequent flyer program.

The airline’s forecast includes an estimated A$17 million non-cash impact from bond rate movements on employee provisions and a one-off A$25 million hit to earnings at its low-cost unit Jetstar from disruption caused by a volcano in Bali, Qantas said.

Qantas is scheduled to announce first-half earnings Feb. 23.

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