Unlike the AMP and Wesfarmers, Qantas muddied the market yesterday, getting its guidance all mixed up and helping send the shares down by the largest amount in 10 months at one stage.
The airlines shares fell more than 9% to the day’s low of $2.69 at one stage, after the company reported a profit that may or may not have been better or worse than guidance, omitted interim dividend and seemed to suggest that second half earnings could range from the paltry to the poor.
The shares closed just above the low for the day at $2.73, a loss of 8% or 24 cents.
The airline said net profit for the first half of 2009-10 fell 72% to $58 million ($210 million in the December 2008 half year); although that wasn’t mentioned anywhere in the 9 page press statement. All it referred to was a statutory profit of $90 million.
And it’s no wonder, first half revenue totalled $6.91 billion, down from $8.07 billion in the December half of 2008.
That missing $1 billion plus in revenue took a big whack out of the airline’s bottom line.
The international business was much weaker and that’s where the cuts in first class seating are going to happen.
The omission of the interim dividend was not mentioned until the last paragraph of that 9 page statement.
The net profit was in the accounting section of the filing with the ASX
The airline seemed to suggest it expects to post an underlying profit for the full year of $300 million to $400 million.
That left the impression that "underlying" earnings could range from $33 million to $133 million for the June half year, which is very much less than the $267 million declared yesterday for the six months to December 2009.
The airline said that higher fuel charges in the half will cost Qantas $200 million and there’s an extra $50 million in depreciation charges.
Quite clearly the cost cutting announced last year won’t cut enough to stave off second half earnings pressure from rising costs.
The airline’s management, led by CEO Alan Joyce, made a big song and dance about ripping out first class seats in many of its planes, expanding premium economy seats by 27% and introducing a new flight entertainment system.
"Qantas announced today it would invest $400 million to upgrade seats and in-flight entertainment on nine Boeing 747-400 aircraft, and reconfigure its Airbus A380 fleet to meet the changing demands of the airline’s international customers," the airline said in the release.
Mr Joyce said the changes would provide all long haul customers with a leading edge and consistent in-flight experience and ensure the airline was best placed to meet forecast changes in premium cabin demand.
“The major upgrade will give all our long haul customers access to our award winning seats and in-flight entertainment Qantas offers on its flagship aircraft, the A380,” Mr Joyce said.
“Customer feedback on the Qantas A380 experience is overwhelmingly positive, and this experience, including the fully flat Skybed in Business, the all-new Economy seat and the in-flight entertainment system will be available to customers travelling on Qantas B747-400 services.”
The plan was first outlined last December.
The new A380 Airbuses could carry an extra 80 to 100 passengers under the Qantas changes, all of them in the cheaper economy seating.
In its commentary on the half, the airline said:
"All operating segments performed well. Although Qantas and Qantas Freight recorded Underlying EBIT below the comparative half-year, the results in this half reflected a significant turnaround from the second half of 2008/09, when both segments recorded underlying losses.
"Jetstar successfully leveraged an increase in capacity to almost triple its comparative year Underlying EBIT result of $43 million.
"The Qantas Frequent Flyer result includes the current half-year impact of the change in accounting estimate implemented on 1 January 2009, which has contributed an additional $78 million. Excluding this impact, the current half-year result is 8 per cent higher than the previous half-year, which was a pleasing achievement in the context of reduced airline capacity.
"The current year Statutory PBT result included impairment losses of $48 million related to changes in estimates of the recoverable value of eight aircraft held for sale."
