Qantas is on track to deliver a record net profit of up to $2.48bn this financial year amid surging travel demand, representing a sharp financial turnaround for Australia’s national carrier.
The forecast full-year result is underpinned by a flying schedule that is now more profitable than before the pandemic, Qantas disclosed in a market update on Tuesday.
The forecast result to 30 June could be almost $1bn higher than its prior record in 2018, which came in at $1.6bn.
Qantas’s profit margins have been helped by huge demand for domestic and international flights, high ticket prices and various cost savings.
The turnaround from several years of pandemic-related losses has not been without controversy.
The airline is facing a possible large compensation bill if a court rules that it illegally outsourced 1,700 ground handler jobs stands. The high court began hearing an appeal by the airline, arguing the outsourcing was a necessary financial measure, earlier this month.
Part of the anticipated record profit, forecast to come in at between $2.43bn and $2.48bn, was generated during a period also marked by persistent flight delays and disruptions, angering passengers.
Alan Joyce, the chief executive of Qantas, said in a statement to investors that lower jet fuel prices were helping put downward pressure on fares while noting there were still more passengers than seats.
“More parts of the aviation supply chain are returning to normal, which means we’re able to put some of the spare aircraft and crew we kept in reserve back in the schedule,” Joyce said.
“The industry remains capacity constrained and the travel category remains strong, so there’s still a mismatch between supply and demand that’s likely to persist for some time, especially for international flying.”
The combination of strong demand, higher-than-normal fares and falling costs mean Qantass’ ability to generate strong returns from its flights “remain materially above pre-Covid levels”.
The large returns rub against the financial pressures faced by households, weighed down by rising rents, mortgages and inflation-fuelled food and electricity costs.
There is evidence that while many households are cutting back on non-essential items, Australians are still prioritising travel and taking pandemic-delayed holidays.
While Qantas noted that fares were dropping, it did not disclose by how much.
Qantas and many other airlines cited rising jet fuel prices last year as one of the main reasons for significant increases in ticket prices.
Jet fuel prices have almost halved from the price peaks recorded in mid-2022, according to the jet fuel price monitor.
Qantas said that its strong balance sheet and positive outlook meant it would increase its existing $500m share buyback by up to $100m.
While an increased share buyback would typically lift a stock price, Qantas shares were down 2% in late morning trading, showing how high expectations are among the airline’s shareholders.
UBS described the announcement as a “positive trading update” as Qantas continues to profit from strong demand and conditions.
This financial year will be Joyce’s last full reporting period at the airline he has led for 15 years. Qantas’s chief financial officer, Vanessa Hudson, will take over as chief executive in November.
