Qantas roars back into black after aggressive cost-cutting

Australian carrier Qantas on Thursday roared back into the black after an aggressive shake-up to stem mounting losses, posting its best interim result in four years. -- PHOTO: REUTERS
Australian carrier Qantas on Thursday roared back into the black after an aggressive shake-up to stem mounting losses, posting its best interim result in four years. -- PHOTO: REUTERS

SYDNEY (AFP) - Australian carrier Qantas on Thursday roared back into the black after an aggressive shake-up to stem mounting losses, posting its best interim result in four years helped by a revival in its international arm.

The A$203 million (S$216.64 million) result in the six months to December 31 marked a stunning turnaround from a net loss of A$235 million in the same period in 2013 and smashed analyst forecasts.

Underlying profit before tax - the airline's preferred measure of financial performance - was A$367 million, compared with a loss of A$252 million previously that was driven by record fuel costs and fierce competition.

The reversal in fortunes - after a record annual loss of A$2.84 billion in the last financial year - comes on the heels of a ruthless cost-cutting drive that has seen thousands of jobs axed, aircraft deliveries deferred and growth at Asian offshoot Jetstar frozen.

Chief executive Alan Joyce said the result showed the group was executing the right plan.

"The decisive factor in our best half-year result for four years was our complete focus on the Qantas transformation programme," he said.

"It's clear that without the impact of transformation, we would not be announcing a profit today. What sets this transformation apart is that we are reducing costs permanently while at the same time delivering Qantas' best ever fleet, product and service.

"We are meeting or exceeding all our targets as we build a sustainable future for Qantas with an emphasis on growing long-term shareholder value." The result was driven by strong performances across all of the airline's divisions, with both domestic and international operations in profit.

Domestic earnings improved to A$227 million from A$170 million previously while the struggling international arm moved into the black for the first time since the global financial crisis, turning a A$321 million loss into a A$53 profit.

The carrier also enjoyed reduced depreciation due to a fleet restructure, a 2.1 per cent boost in revenue to A$8.07 billion and savings from lower fuel prices.

Its low-cost Jetstar offshoot performed well, turning a loss into a profit with the brand growing in Asia and now flying to 66 destinations across 16 countries in the region.

"Qantas has smashed analysts' forecasts, delivering a A$203 million profit that will ease investor concerns and goes someway to justifying the more than doubling of its share price over the last four months," said CMC Markets' chief strategist Michael McCarthy.

"Cost cutting and operational improvements contributed, but a lower oil price is a key factor in the turnaround."

Qantas shares soared six per cent when the market opened, before falling back to be 3.9 per cent higher at A$2.92 in early trade.

The turnaround appears to vindicate Joyce's strategy to slash A$2.0 billion in costs and axe 5,000 jobs to help counter a price war with subsidised domestic rival Virgin Australia.

The chief executive said the airline's financial position was significantly stronger because of this aggressive cost-cutting and it had given Qantas "a solid foundation for growth in earnings".

"All parts of the Qantas business have now contributed to this good result," he said.

"It is about making ourselves strong and resilient through the ups and downs of the economic cycle. Over the next two years, we will further strengthen the Qantas position.

"We expect now that all operating segments will be profitable in the full year," he added.