Qantas posted a more than four-fold increase in first-half net profit in the December half, revealed plans to add more planes to its fleet and revamp its schedule to try and defend itself against a revitalised Virgin Blue, and once again forgot shareholders.
Qantas shares rose on the news of the result and finished higher on the day, up more than 5%, or 13c, to $2.52.
Given the strong profit performance, it was something of a cheapskate act to omit the interim.
Even the analysts at Goldman Sachs had been forecasting a 5c a share resumption of payments to long suffering shareholders.
"No dividend may come as a disappointment to the market," Goldman Sachs said yesterday.
Judging by yesterday’s strong performance, most investors didn’t care about the lack of a dividend for yet another half.
The airline’s CEO Alan Joyce boasted in yesterday’s statement that the result built on the company’s 2010 full-year performance and showed it had emerged from the global financial crisis in a "solid position".
"The Qantas Group has delivered a strong result and is, again, one of the few airlines to remain consistently profitable and continue to hold an investment grade credit rating," Mr Joyce said.
"With half-year underlying profit up more than 56 per cent year-on-year, all parts of the Group performed well, with Jetstar and Qantas Frequent Flyer delivering record half-year profits and Qantas Airlines’ performance significantly improving.
“Qantas and Jetstar are now the two most profitable domestic airlines in Australia, demonstrating the strength of our two brand strategy and capacity to service and grow both the business and leisure sectors," he said.
Despite that and the boasting about the airline’s performance, there was no money for shareholders, and Qantas trotted out the now familiar collection of tired excuses.
"The Board remains committed to the resumption of dividend payments.
"As previously disclosed to the market, the quantum and timing of this will depend on actual and forecast trading results, market conditions, the maintenance of an investment grade credit rating and the level of capital expenditure commitments.
"In the first half of financial year 2011, the operating performance of all Qantas businesses improved significantly and the Board is confident in the outlook for the company. However, significant capital investment is being undertaken, reflecting a fleet renewal to bolster the foundations for future growth.
"Considering this investment program alongside the preference to rely on internally generated capital and debt funding for this investment, the Board believes it is prudent not to pay a dividend at this time.
"Future dividend payments will be assessed against ongoing earnings performance and capital requirements," directors said.
On this basis, and given the low margin high cost nature of the airline business, Qantas shareholders will be waiting years for a resumption of payments.
What also makes it worse is the forecast of better times in the rest of this year and 2012, despite some obvious short term hiccups, such as the continuing cost of the A380 problem and the floods.
The airline predicted materially higher 2011 earnings as yields return to pre-financial crisis levels but it warned of adverse impacts from high fuel prices, recent floods in Queensland and a Rolls-Royce engine explosion which forced it to ground its fleet of A380 aircraft last year.
But it also said it was looking for higher profits in 2012.
Net profit for the six months to December 31 was $241 million compared to $58 million a year earlier. That fell short of analyst expectations for $284 million (Goldman Sachs noted the shortfall).
Underlying pre-tax profit jumped 56% to $417 million. This included a $55 million impact from lost revenues and costs after it grounded its fleet of A380 aircraft.(Qantas says it and Rolls Royce remain in discussions, but so far there’s been no agreement.)
It also forecast an additional impact of $25 million in the second-half from the A380 problems, making the full year impact around $80 million in turnover that will easily top $14 billion for the 12 months to June this year.
Yields were expected to be higher in the second half of the current fiscal year, while capacity is expected to increase by 11% in the same period compared to the first half.
That’s because Qantas is pushing more wide bodied planes onto the east coast-Perth route and Melbourne-Brisbane route to combat the Virgin Blue business class expansion with two wide bodied Airbus planes of its own from May.
But offering more business class seats on this route and price cutting to try and resist Virgin Blue will also mean Qantas will flood the market with economy class seats, which will have to be discounted to maintain relativities with the new business class fare structure.
From February 14, 2011 underlying fuel costs for the second-half of financial 2011 are estimated to increase to around $2 billion due to higher forward market jet fuel prices and increased flying.
Fuel surcharges, fare increases and hedging are being used to mitigate the impact of fuel price rises, the airline said.
Qantas said the Queensland floods were estimated to impact second-half of 2011 underlying profit before tax by up to $55 million.
Cyclone Yasi in North Queensland, meanwhile, is
