Qantas Profit Beats Estimates, Affirms Outlook

Qantas Airways, Australia's biggest airline, doubled its first-half profit, beating market estimates and said it was on track to achieve at least a 40 percent rise in full-year earnings.

"Qantas is seeing no significant dampening in demand in most markets, especially in the domestic and Australian outbound travel markets as a result of the global economic slowdown," Qantas said in a statement on Thursday.

Qantas passenger jets parked at their terminal at Sydney Airport.
Mark Baker
Qantas passenger jets parked at their terminal at Sydney Airport.

While a rising Australian dollar has boosted demand for overseas travel, a spike in fuel costs and uncertainty sparked by financial market turmoil had tempered some growth expectations among analysts.

Qantas, whose shareholders last year rejected a $9 billion buyout bid, reported net profit of A$617.6 million ($566.6 million) for July-December half, compared with A$307.5 million reported a year earlier.

Five brokers surveyed by Reuters had on average seen Qantas' net profit at A$569.5 million.

"While we have benefited from a strong revenue environment, our focus has also remained on costs, efficiencies ... and product improvement," Qantas Chairman Leigh Clifford said in a statement.

Qantas also announced a merger between Qantas Holidays, Qantas Business Travel and Jetset Travelworld and said the move would be earnings per share accretive.

Chief Executive Officer Geoff Dixon said a new ownership structure for Qantas Frequent Flyer would be implemented by late 2008 if shareholders approved such a move.

In December, Qantas had raised its full-year pre-tax earnings forecast to 40 percent, from a 30 percent increase projected earlier, on the back of soaring appetite for air travel.

Earlier this month, Singapore Airlines beat expectations with a 51 percent rise in quarterly profit but warned of an uncertain outlook due to the turbulence on financial markets.

The International Air Transport Association (IATA) last month chopped its 2008 industry profit forecast by a third, warning that spiraling fuel costs and the impact of the global credit crunch would reverse expected growth.

Qantas shares are down 20 percent in 2008, compared with a 13.3 percent fall in the benchmark S&P/ASX 200 index. The shares have lost 28 percent from their life highs reached in December.

Last week, Australia and the United States agreed to open up trans-Pacific air routes between the two countries, which prompted Qantas to increase its flights.

While this route accounts for just 6 percent of Qantas' passengers, analysts estimate it accounts for up to 15 percent of its earnings before interest and tax.