Qantas doubles underlying profit amid tough conditions
Airline reports underlying net profit of A$192m from A$95m last year even as competition on domestic routes from Virgin Australia increases
Qantas Airways, Australia’s flagship carrier, doubled its underlying annual profit as shrinking losses on its international arm offset tougher competition on its lucrative domestic routes, sending its shares up 7 per cent.
Qantas, which formed an alliance with Emirates Airline this year in an effort to trim losses on international routes, has been battling to keep its domestic yields up as investment in the once-booming resources sector slows and the government forecasts limp economic growth into next year.
The slowdown has coincided with a ramping up in competition from rival Virgin Australia Holdings Ltd.
Virgin has been trying to take market share in … [the] domestic space
“Virgin has been trying to take market share in that domestic space, so Qantas has sort of retaliated and tried to hold their ground,” said Nathan Zaia, an analyst at Morningstar in Sydney, adding capacity is currently well above demand.
As well as cutting unprofitable international routes, Qantas has been shedding jobs, reducing capital spending and selling assets to cut debt. It announced it would sell its Qantas Defence Services unit, which provides logistics and support for the Australian government and military, to Northrop Grumman Corp for A$80 million (HK$554.5 million).
Qantas said underlying profit before tax rose to A$192 million from A$95 million a year ago. Underlying operating losses on its international arm halved to A$246 million, while profits on domestic earnings fell 21 per cent to A$365 million.
The airline posted a full-year net profit of A$6 million from a net loss of A$244 million a year ago.