Shares in Australia’s Qantas gained as much as 7.5% on Thursday after the company reported underlying pre-tax first-half profits had come in above expectations and announced plans for a share buyback of up to $378 million.
Qantas said (https://www.asx.com.au/asxpdf/20180222/pdf/43rsyym9bvfhn0.pdf) it was its highest ever first-half profit (on an underlying pre tax basis).
An unchanged unfranked dividend of 7 cents a share Qantas also announced an on-market share buyback round up worth $378 million. That and the interim dividend took the value of the return to shareholders to half a billion dollars.
Sydney-listed shares in the company were up 5.8% at $5.58.
Qantas said its after tax profit rose 18% to $607 million from the previous first-half net profit of $515 million.
The airline reported underlying profits before tax rose 15% year on year to $976 million in the six months through December, surpassing the $950 million top of the company’s forecast range and $124 million more than the same figure for the December, 2016 half year.
Qantas shares rose more than 6% in early trading to $5.61, its highest level for several months.
Gains came mainly from Australian operations with domestic earnings before interest and tax rising 20% to $447 million as load factor, a key element in airline profitability, rose 1.4 percentage points to 78.7%.
That rise more than offset lower earnings fell (down 5.5%) in its international business, despite a 7% increase in revenue, as higher fuel costs and increased competition from other airlines took their toll on profit margins.
That fall was softened a touch by earnings from Qantas’ freight division, which was included in the international business results for the first time. Freight revenue rose $24 million to $440 million.
Budget arm Jetstar’s earnings grew 15% or $43 million, to $318 million, mostly driven by increased seat revenue.
Qantas’ loyalty business, which incorporates its frequent flyer program, offset a fall in revenue due to changes to credit card interchange fees with new programs but still earned a record profit according to Mr Joyce of $184 million, up 1.7%.
Qantas said it was its highest ever first-half profit.
“After several years of consistent performance, we now have a lot of momentum behind us,” chief executive Alan Joyce said in a statement with the results
"Today’s result comes from investing in areas that provide margin growth and a network strategythat makes sure we have the right aircraft on the right route."
Qantas said total revenue grew 5.8% to $8.66 billion in the six months to December 31.
Earnings rose despite an increase in fuel costs, which were up by $58 million, or about 4%, at $1.54 billion.
"We’re coping very well with it," Mr Joyce said of the rising price of oil.
“If oil price is correlated to increased economic activity, which it seems to be doing, there is revenue opportunities to offset that.”
In contrast, Air New Zealand posted a 7.4% fall in first-half pretax profit as rising fuel prices offset record high passenger revenue.
Pretax earnings fell to $NZ323 million in the six months ended December 31 from $NZ349 million in the same period a year earlier.
The prior period also included a $NZ22 million gain related to the divestment of Virgin Australia, so the fall before that one off item was only a couple of million dollars.
Net profit in the first half fell 9.4% to $NZ232 million from $NZ256 million in the first half of 2016-17.
Passenger revenue reached an all-time record for an interim result, at $NZ2.3 billion.
Interim dividend was raised 10% to 11 NZ cents a share.
Investors chased the shares higher and they closed up 2.5% at $2.83.
