Wed, Dec 16, 2015 - Page 15 News List

Qantas forecasts earnings to skyrocket

COST REDUCTIONS:CEO Alan Joyce cited improved international and domestic revenue, as well as reduced expenses due to falling fuel prices, for the likely results

Bloomberg

Qantas Airways Ltd said it expects first-half earnings to more than double as Australia’s national carrier benefits from lower fuel prices, a cost-cutting strategy and revenue growth across its international and domestic operations.

Underlying profit before tax for the six months ending on Dec. 31 is expected to be between A$875 million and A$925 million (US$633.8 million and US$670 million), the airline said in a statement yesterday.

That compares with A$367 million reported a year earlier and the A$885 million mean estimate of three analysts surveyed by Bloomberg.

“Qantas management worked very hard over the last couple of years to reduce costs to extricate themselves from a difficult period and get themselves into this position,” said David Liu, who helps oversee A$450 million including Qantas shares as head of research at Above the Index Asset Management Pty in Sydney.

“In a low oil price environment, if they are able to manage expenses and capacity appropriately, then we’d see them improving profitability,” he added.

Cost reductions, aided by tumbling oil prices, in August helped deliver the airline’s strongest full-year earnings since CEO Alan Joyce took over in 2008. The Sydney-based carrier last month regained its investment-grade credit rating for the first time in two years, while it handed back A$505 million to shareholders.

Qantas shares rose 2.4 percent to A$3.87 at 10:15am in Sydney. That extends this year’s gains to 52 percent, compared with a 9 percent decline for the benchmark S&P/ASX 200 index.

“We’ve seen improved revenue in our domestic and international operations, reduced costs across the group through the Qantas Transformation program, and expect another record half-year result from Qantas Loyalty,” Joyce said in the statement, referring to the airline’s frequent flyer program.

The airline’s forecast includes an estimated A$17 million non-cash impact from bond rate movements on employee provisions and a one-off A$25 million hit to earnings at its low-cost unit Jetstar Airways Pty Ltd from disruption caused by a volcano in Bali, Indonesia, Qantas said.

Qantas is scheduled to announce first-half earnings on Feb. 23 next year.

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