Qantas flying towards profit lift

Qantas expects to report its best result in four years next February as cost cutting and  plunging oil prices improve the business performance of the airline.

In an announcement to the stock exchange today, the company forecast pre-tax underlying profit of between $300 million and $350 million, which sent the airline’s stock soaring 12.4 per cent to $2.36 after an hour of trading.

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Qantas shares have more than doubled in the past few months after a horror stretch of losses that culminated in a $2.84 billion full-year loss last financial year.

A year ago, it embarked upon a $2 billion cost cutting strategy, named Qantas Transformation, that has resulted in mass redundancies.

The company told the ASX that the strategy had now begun to bear fruit and was on schedule to realise around $350 million in savings this half. The program delivered $204 million in savings in the second half last year.

The recent sudden drop in oil prices also was flowing through to the bottom line, with the airline predicting a $30 million benefit this half.

All divisions, including Qantas International, reportedly are in the black following years of turmoil that has seen management at loggerheads with unions following a strategy to concentrate on the company’s cut price division Jetstar.

A protracted battle with rival Virgin also took its toll, with both airlines racking up heavy losses last financial year.

Qantas chief executive Alan Joyce said the forecast vindicated his cost cutting strategy and the early results in the three-and-a-half-year program gave the company confidence the plan would continue to deliver.

“This demonstrates that the strategy we have outlined to transform our business is working,” he said.

“This is an improvement of over $550 million compared with the first half last year with Qantas Transformation being the primary driver of the turnaround.”


Topics: Qantas
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