Qantas shares were sold off and then drifted higher yesterday in the wake of the announcement of another lift in dividend and share buyback.
It is the second time round of capital management measures from the airline in eight months – the first was with the full year results last August.
The airline will start a new $305 million buyback on top of a lift in the dividend to 12 cents a share from 7 cents.
That’s a total of $500 million for shareholders this half with the higher dividend to see $195 million paid to shareholders.
This was despite first-half profit falling 16.3% to $498 million on a big jump in fuel costs.
The $416 million increase in the airline’s fuel bill hit the bottom line but overall revenue rose 5.8% to $9.2 billion and Qantas Domestic, Jetstar Domestic, and Qantas Loyalty all reported record results.
Once the buyback is finished mid-year Qantas will have handed back $3.6 billion to shareholders since October 2015.
The shares fell more than 3% to a low for the day of $5.46 before they turned high to end at $5.77 – up 1.9%. In some respects, the treatment from the market was similar to that given to shares in Flight Centre yesterday (see separate story).
Qantas expects growth in fuel cost growth to slow in the second half to a still solid rise of 21% against the 27% jump in the December half year.
“Higher oil prices were a significant headwind and we moved quickly to recover as much of the cost as we could,” chief executive Alan Joyce said in a statement with the results.
“That’s easier to achieve in the domestic market than on longer international routes, where fuel is a much bigger factor, and that’s reflected in the segment results.”
Underlying earnings from international operations slipped from a restated $224 million in the prior corresponding period to $90 million thanks to the impact of higher fuel prices.
Underlying earnings from domestic operations rose 0.9% to a record $453 million, with a 5.7% in revenue more than offsetting the rise in fuel costs.
As well as reduced fuel cost headwinds in the second half, the carrier predicts improvement from the prior corresponding period with Easter falling within the school holidays this year.
“Looking ahead, we’re seeing strong forward bookings. Competitor capacity growth has slowed internationally and is relatively flat domestically. And oil prices have declined from the peaks we saw late last year.
“These factors point to a strong second half and we expect to completely recover our increased fuel costs by the end of this financial year.
“We are mindful of potential signs of weakness in the broader economy and we’re always adjusting capacity to meet demand in individual markets – but overall revenue and yield indicators remain positive,” Mr. Joyce said in yesterday’s statement.
