Qantas shares rally on strong demand for flights

Australia’s flag carrier Qantas has said it will return to profit this year, sending its shares up by as much as 12 per cent and marking the end of a financial crisis during the coronavirus pandemic.

Qantas, known as the “Flying Kangaroo”, said on Thursday that it would report an underlying pre-tax profit of up to A$1.3bn (US$815mn) in the six months to December, double market estimates, as strong demand for flights offset higher fuel costs and inflation.

Shares in the airline soared to A$5.83, their highest level since November 2021, on the strong profit forecast.

Qantas reported three consecutive years of more than A$1bn losses as a result of pandemic restrictions. It has said it lost A$25bn of revenue during the period.

Net debt, which spiralled to almost A$6.5bn during the pandemic, is expected to fall to between A$3.2bn and A$3.4bn by the end of the year, well below the airline’s A$3.9bn target range.

Qantas had struggled to resume normal operations as pandemic restrictions were loosened. Staff shortages, flight delays, cancellations and rising rates of lost luggage infuriated its customers and prompted harsh criticism of the company.

Its service levels missed targets in September despite significant investment in recruiting extra staff and dispatching office workers to help ground staff.

“It’s been a really challenging time for the national carrier but today’s announcement shows how far we’ve come. Since August, we’ve seen a big improvement in our operational performance and an acceleration in our financial performance,” said Alan Joyce, long-serving Qantas chief executive.

Owen Birrell, an analyst with RBC Capital Markets, said the financial results were “impressively strong” but noted that the profit upgrade was driven by higher flight prices.

Joyce, who has run Qantas since 2008, led a A$400mn share buyback this year. He remains at loggerheads with the unions, which have threatened in recent weeks to strike over pay conditions.

Qantas said that after a two-year wage freeze during the airline’s “hibernation”, it would increase wages by 3 per cent, up from 2 per cent, at a cost to the airline of A$40mn.

“The fact our financial recovery has accelerated means we can invest more in rewarding our employees, who are doing an amazing job,” Joyce said, adding that staff were also paid A$200mn worth of bonuses.

But the aviation union criticised Joyce for only raising staff wages by an additional 1 percentage point during an inflation and cost of living crisis, highlighting that the chief executive could be paid millions of dollars more this year as the share price rises.

Michael Kaine, national secretary of the Transport Workers’ Union, said: “Qantas management under Joyce has treated its own workforce as its nemesis — workers have been villainised, victimised and are now being used as pawns in Qantas’ latest PR stunt.”