Qantas posts record profit, but shares hit by fuel cost worries

Qantas plans to launch the world’s longest non-stop commercial flight, from Sydney to London, by 2022. (Reuters)
Updated 23 August 2018
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Qantas posts record profit, but shares hit by fuel cost worries

  • The airline’s underlying pretax profit rose to A$1.60 billion for the 12 months ended June 30 from A$1.40 billion a year earlier
  • The airline plans to launch the world’s longest non-stop commercial flight, from Sydney to London, by 2022

SINGAPORE: Australia’s Qantas Airways posted a record annual profit, powered by its domestic business, but its shares fell on concerns about rising fuel prices despite the carrier saying it would be able to mitigate its impact.
Qantas forecast an A$690 million ($504.80 million) increase in its fuel bill for the current financial year but CEO Alan Joyce said the airline should be able to fully recover rising fuel costs in the domestic market and do so substantially in the international market.
Investors, however, were less sure. Shares fell as much as 7.7 percent in early trading, although losses narrowed to 2.4 percent by early afternoon after the management team reiterated the positive outlook on an analyst call.
Bank of America Merrill Lynch analysts, in a note, maintained their “buy” rating on the stock, telling clients the guidance supported their forecast of flat earnings in the current financial year versus a consensus estimate for a 6 percent fall.
The airline’s underlying pretax profit, its most closely watched measure, rose to A$1.60 billion for the 12 months ended June 30 from A$1.40 billion a year earlier. That was in line with analysts’ expectations. Australia’s flagship carrier also announced an A$332 million stock buyback program.
Separately, rival Air New Zealand Ltd. reported on Thursday its second-highest ever annual profit before tax but shares fell 3 percent after it said earnings would fall by as much as 21 percent in the current financial year due to higher fuel prices.
Qantas, which controls nearly two-thirds of Australia’s domestic capacity, said domestic underlying earnings before interest and taxes for Qantas and its low-cost arm Jetstar rose 25 percent for the year ended June 30 as they cut capacity and hiked fares.
CEO Joyce said forward booking revenue was running more than 6 percent higher than at the same time last year. He said Qantas would also increase revenue in its frequent flyer business.
Qantas expects to keep domestic capacity flat in the first half ending December 31 and for international capacity to rise by 1 percent. Joyce said demand remained strong, but the airline was focused on filling more seats rather than adding more capacity.
Under Joyce’s reign, Qantas has executed a successful turnaround that has cut costs and allowed it to return cash to shareholders, helping to push the airline’s shares to record highs. Qantas shares had risen 25 percent since the start of January before the results were announced.
The airline plans to launch the world’s longest non-stop commercial flight, from Sydney to London, by 2022 after starting Perth-London flights in March.
Joyce said the carrier was in talks with Airbus SE and Boeing Co. about ordering jets suitable for the mission and would make a decision next year, assuming it could also gain approval from regulators and its pilot workforce.


American Airlines ‘unaware’ of some Boeing 737 MAX functions until last week

Updated 8 min 42 sec ago
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American Airlines ‘unaware’ of some Boeing 737 MAX functions until last week

  • The FAA and Boeing are evaluating the need for software or design changes to 737 MAX jets
  • ‘Safety remains our top priority and is a core value for everyone at Boeing’

WASHINGTON: American Airlines Group Inc. said on Wednesday it was “unaware” of some functions of an anti-stall system on Boeing Co’s 737 MAX until last week.
Boeing and the US Federal Aviation Administration (FAA) issued guidance on the system last week after a Lion Air jet crashed in Indonesia on Oct. 29, killing all 189 people on board.
The FAA warned airlines last week that erroneous inputs from the system’s sensors could lead the jet to automatically pitch its nose down even when autopilot is turned off, making it difficult for pilots to control.
The system was designed to prevent the jet from stalling, according to information provided by Boeing to airlines.
“We value our partnership with Boeing, but were unaware of some of the functionality of the Maneuvering Characteristics Augmentation System (MCAS) installed on the MAX 8,” an American Airlines spokesman said.
“We must ensure that our pilots are fully trained on procedures and understand key systems on the aircraft they fly.”
Indonesian investigators said on Monday the situation the crew of a doomed Lion Air jet was believed to have faced was not contained in the aircraft’s flight manual. US pilot unions were also not aware of potential risks, pilot unions said.
The FAA and Boeing are evaluating the need for software or design changes to 737 MAX jets in the wake of the Lion Air crash, the regulator said on Tuesday.
The American Airlines spokesman said his airline was continuing to work with Boeing and the FAA and would keep pilots informed of any updates.
A Boeing spokeswoman said the manufacturer could not discuss specifics of an ongoing investigation but it had provided two updates for operators around the world that re-emphasize existing procedures to deal with situations relating to MCAS.
“We are confident in the safety of the 737 MAX,” she said. “Safety remains our top priority and is a core value for everyone at Boeing.”