Qantas profit drives shares to record high as it orders 20 new jets

Qantas shares soared to an all-time high after it posted its second-highest earnings on record, helped by strong travel demand and a firm outlook.

Net income jumped 28 per cent to $1.61 billion in the year to June 30, the airline’s highest profit since its record result in 2023, as it also placed an order to buy 20 new Airbus jets for flying into Asia, as well as domestically.

Standout profits from Jetstar, a broader fleet renewal, and cost savings are seen as drivers of its earnings.

The airline declared a final dividend of 16.5¢ a share and said it would also pay shareholders a special dividend of 9.9¢. Its shares closed at $12.12, up 9.1 per cent, after reaching as high as $12.62 – an all-time high.

“We saw a continuation of the factors that drove our strong performance in the first half – Australian’s love of travel continued to drive strong demand,” chief executive Vanessa Hudson said. “We are already seeing the benefits of our new aircraft.”

Jetstar delivered a 55 per cent increase in underlying earnings before interest and taxes, launching 11 new international routes, including Brisbane-Bangkok. Qantas itself launched five new international routes, including Perth-Paris.

Qantas’ underlying earnings reached $2.39 billion, largely in line with analyst forecasts.

Domestic corporate travel almost reached pre-COVID levels during the year, Hudson said, “showing that Zoom and Teams meetings have not ended face-to-face business meetings”.

Qantas said it expects “ongoing strong travel demand” during the six months to the end of December, with domestic revenues forecast to rise between 3 and 5 per cent.

International sales are expected to increase by 2 to 3 per cent during the half.

Planes, planes, planes

Underscoring the company’s push to modernise its fleet, cut operating costs and boost flexibility, Qantas said it was buying 20 Airbus A321XLR aircraft in addition to the 28 it already has on order.

The narrow-body jet uses a new design with an extra fuel tank that increases its range, allowing it to fly into Asia as well as domestically, while keeping the cost per passenger low.

The extra 20 XLRs on order will have lie-flat business seats, which means they can be used on international as well as domestic flights.

Qantas in 2022 placed an order with Airbus for 28 of the new planes, with an option to buy more, which it is now exercising. Having trialled the new aircraft on the busy Melbourne to Sydney route last month, it plans to start regular passenger flights on the new planes in mid-September on Qantas’ domestic network.

Hudson said Jetstar would receive the 321XLR plane at a later date as well to help it grow its international footprint.

Sydney-based Ten Cap fund manager Jun Bei Liu said Qantas has performed “incredibly well” in the domestic and international environment. Qantas has “performed very well” also “in the way they have improved their businesses, improving operational efficiency”.

“That just gives investors more confidence about how … for the next few years they will embark on more, higher capital expenditure purchases to buy more planes, refreshing lots of those things,” she said.

Hugh Dive, of Atlas Funds Management, said Qantas delivered “solid headline numbers”, with Jetstar as well as its international and loyalty program profits being “the highlights”.

The company’s net debt, covering costs for new aircraft and capitalised maintenance, has gone up, driven by capital expenditures, but that was “due to the capex catch-up required to modernise the fleet after the assets were ‘sweated hard’ under the previous CEO,” he said.

Dive said the dividend would have been higher if Qantas didn’t need to divert money into capital expenditures to purchase new planes.

Turbulent turnaround

Qantas is in its second year of a turnaround engineered by Hudson, who took over from her controversial predecessor, Alan Joyce. Under her stewardship, the airline has sought to rebuild its public image, smooth over industrial relations disputes and update its existing domestic fleet, both through new planes and new interiors.

Seeking to boost returns, Qantas also shuttered its Singapore-based low-cost carrier Jetstar Asia in late July as rising costs and increased competition on its routes eroded the regional airline’s profits. The planes were redeployed to the airline’s Australian fleet.

Earlier this month, a court issued a $90 million penalty to Qantas over the illegal sacking of 1800 ground handlers during COVID in 2020. It came on top of a $120 million compensation amount agreed to by Qantas and the Transport Workers’ Union.

Seeking to capitalise on its buoyant share price to improve industrial relations, the company unveiled a new employee share plan announced to allow 25,000 staff to receive $1000 in Qantas stock on an annual basis, following a one-off $1000 payment made in December 2024.

Asked if the company’s new share scheme was an effort to show cultural change after the company received a $90 million penalty for the 2020 illegal sacking, Hudson said: “It’s not about trying to demonstrate anything other than a commitment to our people”.

“This is a very genuine share plan for our people that enables them to grow with us [and] also participate in the dividends, and as you accumulate shares, you’ll also be rewarded over time.”

In July, Qantas disclosed that 5.7 million customer records had been hacked through a third-party vendor at a call centre in the Philippines. Successive disclosures alarmed the public – including the top-tier loyalty club lounge – even as the airline moved swiftly to address the breach.

Hudson noted that even before the ground-handling penalty came out last year, Qantas gave staff a $1000 thank you bonus just before Christmas.

Qantas shares have now gained more than 33 per cent since the start of the year as demand for travel remained undimmed by the cost-of-living crisis.

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