Boom, boom – not the sound of a jet breaking the sound barrier, but Qantas (QAN) shares taking off yesterday after one of the most upbeat briefings delivered by the airline’s management in recent years.
As a result the airlines shares surged more than 10% at one stage as management said profits would surge because of a $2 billion benefit from the cuts and restructuring, lower fuel prices and higher efficiencies.
Shares in Australia’s largest airline surged 24¢ cents to $3.56 – up 7.3% and their highest level since September 2008. The intra day high was $3.65 – the highest the shares have been for seven years.
QAN 1Y – Qantas soaring, capital management moves next?
And, to make it all a bit surreal, the company suggested there could be some capital management moves – including (shock, horror) the resumption of dividend payments to long suffering shareholders.
Qantas last paid a dividend to shareholders back for the first half of 2008-09 – just as the GFC was erupting, damaging airline travel, consumer confidence and Qantas with it. That payment was six cents a share.
Maintaining an optimal capital structure would provide the opportunity to return capital to shareholders or reinvest in the business, Qantas said in its briefing notes yesterday.
The company said its board was “well placed” to consider shareholder returns such as dividends or share buybacks. A buyback would be the favourite, seeing that’s what big investors are demanding and getting from companies at the moment.
Qantas said its fuel bill has dropped by about $550 million due to the plunging oil price – the benefit at the halfway mark was just under $100 million. On top of that the airline says there will be $875 million in benefits flowing from its so-called transformation plan by the end of June.
As a result, Qantas looks like delivering a full-year underlying profit of more than $900 million. That’s 50% more than the market consensus net profit of $683.6 million.
As part of its restructuring, Qantas has already cut 4,000 of the 5,000 jobs it has targeted by 2017.
Qantas has forecast $2 billion in transformation benefits by 2017 and says its on track to cut debt by $1 billion in the 2014-15 financial year.
The company said investment in growth would maximise long-term shareholder value by "leveraging the group’s competitive advantages" and "positioning the group to succeed in future growth markets".
Qantas would face aggressive competition in a flat domestic market during the 2015-16 financial year, the airline warned. But it said it had a strategy in place to maintain profit performance.
Qantas posted a $203 million net profit for the half year in February, a turnaround from a $235 million loss at the same time last year. That was after a full-year net loss of $2.8 billion for 2013-14.
