Qantas soars to record profit, unveils buyback amid rosy outlook

The ‘Flying Kangaroo’, which controls nearly two-thirds of Australia’s domestic market, has pushed average domestic ticket prices to their highest levels in almost a decade while trimming capacity. (Reuters)
Updated 22 February 2018

Qantas soars to record profit, unveils buyback amid rosy outlook

SYDNEY: Australia’s Qantas Airways said half-year profit jumped to a record on cost cuts and hikes in domestic fares — which combined with a share buyback sent its stock bounding higher.
The results are the latest in a slew of robust earnings for the aviation sector and Qantas CEO Alan Joyce was upbeat about future earnings prospects, noting that Australia’s all-important resources sector was growing for the first time in three years.
“We’ve a lot of work to do to maintain it, but if we deliver on that work I have no doubt that the company can keep on maintaining this kind of performance,” he told a news conference.
It also outlined plans for its own pilot academy to address a severe pilot shortage globally. The academy will start next year and aims to train 500 pilots a year when fully established.
The “Flying Kangaroo”, which controls nearly two-thirds of Australia’s domestic market, has pushed average domestic ticket prices to their highest levels in almost a decade while trimming capacity.
At the same time, demand has gathered pace. In addition to the pick-up in the resources sector, Joyce said growth in the financial services, construction and infrastructure sectors were driving business travel demand. Leisure demand was also strong, with international tourist numbers at record highs.
Underlying profit before tax, its most closely watched measure, surged 15 percent to A$976 million ($760 million) for the six months ending December 31, its best result for a first-half and around 3 percent higher than the top of its own guidance. Domestic revenue jumped by a fifth.
Investors also cheered a A$378 million buyback, sending its shares up as much as 10 percent, their biggest daily gain in three years. They last traded 6 percent higher.
“Capacity and capital discipline at a time where demand growth remains robust is driving the stock and its outlook,” said Sondal Bensan, an analyst at Qantas’ biggest shareholder, BT Investment Management wrote in an email.
” next leg will be in the international business that has been held back the past two years,” he said.
Other airlines and aviation firms are also basking in better times for the industry.
Also reporting on Thursday, Air New Zealand said it was destined for its second-highest annual profit ever on the back of a tourism boom.
Flight Center Travel Group, Australia’s biggest listed travel agency, sent its shares to a record high after beating half-year profit expectations and lifting its guidance. Its online rival Webjet saw it stock rocket 15 percent higher as revenue more than tripled.
Last week Singapore Airlines said it had lifted its quarterly profit by almost two-thirds as passenger numbers and cargo revenues rose.
Qantas also confirmed the purchase of 18 long-range Airbus A331LRneo aircraft for budget arm Jetstar.

Merkel seeks united front with China amid Trump trade fears

Updated 22 May 2018

Merkel seeks united front with China amid Trump trade fears

  • Merkel seeks common ground to ward off trade war
  • Plans complicated by US policy moves

Chancellor Angela Merkel visits China on Thursday, seeking to close ranks with the world’s biggest exporting nation as US President Donald Trump shakes up explosive issues from trade to Iran’s nuclear deal.

Finding a common strategy to ward off a trade war and keep markets open will be Merkel’s priority when she meets with President Xi Jinping, as Washington brandishes the threat of imposing punitive tariffs on aluminum and steel imports.

“Both countries are in agreement that open markets and rules-based world trade are necessary. That’s the main focus of this trip,” Merkel’s spokeswoman Martina Fietz said in Berlin on Friday.

But closing ranks with Beijing against Washington risks being complicated by Saturday’s deal between China and the US to hold off tit-for-tat trade measures.

China’s economic health can only benefit Germany as the Asian giant is a big buyer of Made in Germany. But a deal between the US and China effectively leaves Berlin as the main target of Trump’s campaign against foreign imports that he claims harm US national security.

The US leader had already singled Germany out for criticism, saying it had “taken advantage” of the US by spending less than Washington on NATO.

Underlining what is at stake, French Economy Minister Bruno Le Maire warned the US-China deal may come “at the expense of Europe if Europe is not capable of showing a firm hand.”

Nevertheless, Merkel can look to her carefully nurtured relationship with China over her 12 years as chancellor.

No Western leader has visited Beijing as often as Merkel, who will be undertaking her eleventh trip to the country.

In China, she is viewed not only as the main point of contact for Europe, but, crucially, also as a reliable interlocutor — an antithesis of the mercurial Trump.

Devoting her weekly podcast to her visit, Merkel stressed that Beijing and Berlin “are both committed to the rules of the WTO” (World Trade Organization) and want to “strengthen multilateralism.”

But she also underlined that she will press home Germany’s longstanding quest for reciprocity in market access as well as the respect of intellectual property.

Ahead of her visit, Beijing fired off a rare salvo of criticism.

China’s envoy to Germany, Shi Mingde, pointed to a “protectionist trend in Germany,” as he complained about toughened rules protecting German companies from foreign takeovers.

Only 0.3 percent of foreign investors in Germany stem from China while German firms have put in €80 billion in the Asian giant over the last three decades, he told Stuttgarter Nachrichten.

“Economic exchange cannot work as a one-way street,” he warned.

Meanwhile, looming over the battle on the trade front is another equally thorny issue — the historic Iran nuclear deal, which risks falling apart after Trump pulled the US out.

Tehran has demanded that Europe keeps the deal going by continuing economic cooperation, but the US has warned European firms of sanctions if they fail to pull out of Iran.

Merkel “hopes that China can help save the atomic deal that the US has unilaterally ditched,” said Die Welt daily.

“Because only the giant emerging economy can buy enough raw materials from Iran to give the Mullah regime an incentive to at least officially continue to not build a nuclear weapon.”