Qantas back into black with modest profit

SYDNEY: Australian flag carrier Qantas has bounced back into the black, the airline announced, with a modest annual net profit boosted by cost-cutting and its alliance with Emirates.
The airline posted a profit of Aus$5 million ($4.5 million) in the 12 months to June 30, a major improvement on the historic Aus$245 million loss the previous year, when high fuel costs and industrial action hammered the bottom line.
Its underlying profit before tax — the airline’s preferred measure of financial performance — was Aus$192 million, up from Aus$95 million.
“The market is very tough. But we are focused on the elements we can control,” said chief executive Alan Joyce as the carrier recovered from its first annual loss since privatization in 1995.
“We have Australia’s leading airlines and loyalty business — and we have a clear strategy to build an even stronger business for the future.”
The group’s troubled international division remained a weight on the company, posting a loss of Aus$246 million in the year to June.
But that compares with a loss of Aus$484 million the previous year, signalling that Joyce’s strategy of scrapping less profitable routes, expanding into Asian markets and hooking up with Dubai-based Emirates is paying dividends.
“We have made considerable progress with our turnaround plan for Qantas International and we remain on track toward our target for the business to return to profit in FY15,” Joyce said.
Under the Emirates alliance, Qantas has shifted its hub for European flights to Dubai from Singapore, which Joyce said had given the group a strengthened position on routes to Europe, the Middle East and North Africa.
“Bookings have been very positive, running at about twice the level of Qantas’s previous codeshare arrangements for flights to Europe,” he said, adding that the full benefits were expected to flow from 2015.
“We have reduced Qantas International’s cost base by 5 percent, having withdrawn from loss-making routes, retired ageing aircraft and completed the reconfiguration of nine Boeing 747s and all 12 of our A380s, resulting in improved fleet economics.”
He said the group’s focus “remains squarely on making Qantas International a competitive and sustainable business that can ultimately grow again.”
Earnings from Qantas’s domestic business totalled Aus$365 million, down from Aus$463 million, still profitable but coming under increasing pressure from key rival Virgin Australia, which reports its annual results on Friday.
“Our financial position has been strengthened by the actions we have taken over past 12 months: reducing debt, extending our maturity profile and taking a prudent approach to capital expenditure,” said Joyce.
“We have also continued our policy of selling non-core assets where appropriate.
“Our focus remains on building long-term shareholder value. We will continue to be disciplined in managing capital expenditure and costs, while improving the customer experience and engaging our people to provide the best possible service.”