The Qantas Group has increased its profit expectations for the first half of FY23 due to the continued strength of travel demand, which has four parts.
- $1.35 billion to $1.45 billion in underlying profit before taxes are now anticipated for the first half of 23.
- By December 31, 2022, net debt is expected to fall from $2.3 billion to $2.5 billion.
- Improved stability resulted from investments in operations during the most recent COVID wave and extreme weather.
- On track to share recovery benefits; bonuses of up to $11,000 for employees who are not executives.
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Profit before taxes
Qantas Group expects a Hidden Benefit Before Expense of between $1.35 billion and $1.45 billion. The profit range stated at the beginning of October 2022 has increased by $150 million.
There are indications that limitations on international capacity are driving domestic leisure demand, which is advantageous to Australian tourism. Consumers continue to place travel above other spending categories.
Net Debt
Qantas Group’s net obligation is expected to tumble to $2.3 billion and $2.5 billion by 31 December 2022. The acceleration of revenue inflows as customers book flights on Qantas, Jetstar, and partner airlines into the second half and beyond, as well as the deferral of approximately $200 million of capital expenditure to the second half, is mainly responsible for this being roughly $900 million higher than what was anticipated in the most recent update.
Over a million sale fares were launched in October, despite limited capacity, and additional sale activity is anticipated in the coming weeks. Over the following year, frequent flyers will have access to over five million reward seats, and other Points Planes will soon be introduced. In the year’s second half, the Group is adding capacity as quickly as possible while maintaining operational dependability.
At an average price of $5.66, 76% of the $400 million share buyback announced in August 2022 has been completed. The Board is positioned to consider future shareholder returns following the Group’s financial framework and the phasing of capital expenditures for fleet renewal with low net debt levels in February 2023.
Operations during COVID & extreme weather
In October, Qantas was ranked as the domestic airline with the highest percentage of on-time flights. During the most recent wave of COVID infections in the community and into the busy Christmas season, the $200 million investment in rostering additional staff, continuing recruitment, and reserve aircraft will assist in maintaining these levels and limiting the impact of extreme weather in November, particularly wind.
Customers have now redeemed approximately 60% of the $2 billion in COVID-related travel credits held by the Group. Over the next year, new initiatives will be announced to encourage full utilisation of remaining credit at approximately $70 million per month.
Despite international capacity remaining 30% below pre-COVID levels, fuel costs are expected to reach approximately $5 billion for FY23—a record high for the Group—even though they are still significantly higher than in FY19.
Recovery Benefits
As part of its improved pay policy, the Group recently concluded a three-year agreement with Jetstar pilots and anticipated reaching in-principle agreements with others in the coming weeks. A post-COVID EBA has been signed by over 6,500 employees or 33% of those covered by an enterprise agreement.
A wide range of measures, including legislative moratoria on loan repayments and public guarantees in Member States, are implemented by the European Banking Authority (EBA) guidelines.
To ensure that supervisors and the general public have a complete understanding of the risk profile of institutions and the asset quality on their balance sheets, the guidelines were created to fill in data gaps caused by such measures.
Subject to critical conditions being met, the Group is on track to share the benefits of the recovery with approximately 20,000 non-executive employees through a $5,000 boost payment and up to 1,000 Qantas shares (currently worth roughly $6,000).
