Qantas’ share price hit a near three-year high of $6.23 yesterday after it sprang another surprise earnings update on the market.
Qantas told the ASX in an early morning statement that it had boosted earnings guidance for the six months to the end of December – just five weeks away – as stronger consumer demand continues to lift the airline’s business recovery despite capacity restraints, record air fares and higher fuel costs.
The airline said it now expects to report an underlying pre-tax profit of between $1.35 billion and $1.45 billion for the December half, up $150 million from the upgrade in October at the 2022 annual meeting.
Net debt is now expected to fall to an estimated $2.3 billion and $2.5 billion by December 31, around $900 million less than forecast in the October update of $3.2 to $3.4 billion. That forecast said the debt range was “outside the bottom of the target range”
The new, lower range is so low as to render the $3.9 billion target range irrelevant and confirms how Qantas continues to squeeze passengers by high fares, capacity constraints and weak service levels.
Investors loved it and sent the shares to a high of $6.23, the highest they have been since the start of the pandemic in early 2020 when the first round of lockdowns saw the airline grounded. The shares closed at $6.18, up 5.2% for the day.
“Consumers continue to put a high priority on travel ahead of other spending categories and there are signs that limits on international capacity are driving more domestic leisure demand, benefiting Australian tourism,” Qantas said in Wednesday’s statement said.
The higher profit prediction comes despite another surge in fuel costs which are now forecast to reach $5 billion by the end of the financial year next June.
That will be a record for the carrier and shows how it is managing to dominate the local aviation industry to a degree not seen before.
Qantas said that around $800 million in customer travel credits issued over the pandemic have still to be redeemed. Total credit usage has reached about $70 million a month. Qantas says it will reveal new initiatives so all of the remaining credits can be used by the end of this financial year.
Just under 80% of the group’s $400 million share buyback announced in August has been completed at an average price of $5.66 per share. Qantas indicated that the board will consider future shareholder returns in February based on its low level of debt.
An unfranked dividend would be one measure seeing it has already run a major buyback.
