Qantas profit climbs despite higher fuel bills
24/08/2018 | Author: Robyn Ironside, Australian Business Review
Higher airfares have helped Qantas beat rising fuel bills and post a 15 per cent increase in net profit to $980 million for the 2018 financial year.
Underlying profit before tax soared 14 per cent to $1.6 billion — a new record for the airline and in line with market expectations and forecasts.
Qantas Group Domestic and the Qantas Frequent Flyer program were the standout performers with record earnings of $1.1bn and $372m respectively.
However, the results came at a cost for travellers, with the data revealing Qantas Domestic airfares rose 8 per cent in the year to June 30. Jetstar fares were up 5 per cent and international fares rose 2.5 per cent.
Putting upward pressure on fares was a reduction in available seats on domestic routes as Qantas replaced larger A330s with Boeing 737s on some services and 737s with 717s on others.
Domestic capacity growth was expected to remain flat in the first half of the 2019 financial year, while international seat numbers increased 1 per cent.
Group chief executive Alan Joyce said with the airline’s fuel bill expected to swell by 21 per cent in the 2019 financial year to $3.92bn, Qantas was confident of keeping its bottom line in good health.
“The domestic businesses are performing really well, we’re seeing strong demand, so we should at least recover fuel (costs) and maybe do a bit better than that,” Mr Joyce said.
“Internationally, it depends on each market. The US airlines are not hedged so they have every incentive to recover (fuel costs) and the same is true of a lot of the market. That gives us confidence our business can continue to cope very well in a high fuel cost environment.”
Qantas staff would share in the good result with a $2500 bonus for each of the group’s 27,000 non-executive employees, Mr Joyce said.
“We’re very pleased to reward our people with a bonus for this fantastic result,” he said. “Strategy drives our performance, but it’s our people who deliver on it. They are the reason our customers keep coming back.”
But unions reacted angrily to the “conditions” of the bonus, which Qantas confirmed would not be paid until employees signed a new enterprise bargaining agreement.
Flight Attendants Association of Australia vice-president Bruce Roberts said that in the case of its members, that would not be until 2021. “It’s a record profit for Australia’s biggest airline and it does seem like a pretty poor decision for workers to have to wait three years to get a bonus,” Mr Roberts said.
“The FAAA is disappointed. We’ve been inundated with feedback from members who feel very disheartened by this after a very challenging year.”
He said the last bonus was paid to those who signed an 18-month wage-freeze agreement, and members felt the goalposts had again been shifted. “Our social media sites have been flooded with comments from disappointed and upset crew,” Mr Roberts said. “We would’ve preferred to see an outcome that was the same as last year.”
Australian Licensed Aircraft Engineers Association secretary Steve Purvinas said it was “disgusting” to make employees wait three years for a bonus, and then on the condition they signed a new EBA.
“If Alan Joyce ever wanted to declare war on employees this is it,” Mr Purvinas said. “Employees are going to revolt in the face of this blatant corporate greed.”
Australian and International Pilots Association president Murray Butt said he was still seeking clarification on the bonus payment. “There’s some conflicting information around, and we’re not yet sure what it means,” Captain Butt said.
The bonus would consist of $500 in travel credits and $2000 cash, and cost Qantas a total of $67m.
The airline also committed to a new pilot training academy, in addition to the one already announced but still to be delivered, at a cost of $20m.
Nine regional centres were being considered for the training academies — Tamworth, Wagga Wagga, Dubbo, Bendigo, Launceston, Busselton, Alice Springs, Mackay and Toowoomba.
Despite analysts delivering a positive assessment of the results, Qantas shares closed down 3.3 per cent at $6.495.
A fully-franked dividend of 10c will be paid on October 10.