Bangkok--Feb 17--Thanaburi Asia Pacific
Qantas Airways today announced a half year profit before tax ended 31 December 2004 of 18,640.30 million baht ($601.3 million), a 13.4 per cent increase on the same period last year. The net profit after tax was 14,210.40 million baht ($458.4 million), up 28.1 per cent from the comparative half year.
The Directors declared a fully franked interim dividend of 3.10 baht (10 cents) per share, 0.62 baht (two cents) higher than the interim dividend paid last year.
The Chairman of Qantas, Margaret Jackson, said Qantas continued to benefit from an emphasis on growing its core flying while seeking efficiencies in all its business segments. The increased dividend was a change from Qantas’ existing dividend policy, but reflected the confidence of the Board and Management in the company’s ability to internally fund future growth and investment while reducing gearing.
“This will be achieved by growing future cash flow so that it exceeds capital expenditure. We do not believe this will be easy, but we must have the discipline to reward our shareholders — by paying franked dividends — while investing for growth,” she said.
The Chief Executive Officer of Qantas, Geoff Dixon, said Qantas had continued to grow its operations and its workforce while delivering increased profitability. The main drivers of the result were:
- a strong performance from the domestic flying business which contributed 12,093.10 million baht ($390.1 million) in earnings before interest and tax (EBIT), up 2,052.20 million baht ($66.2 million) or 20.5 per cent on the prior half year;
- improved yields in the international business market, particularly as a result of the introduction of new A330 aircraft for regional flying and the continued roll out of the Skybed sleeper seat;
- a reduction in the impact of historically high fuel prices through a hedging program and a fuel surcharge;
- a 4.0 per cent reduction in unit costs, excluding the benefit of favourable foreign exchange movements; and
- further growth in the Group’s freight business, with the introduction of additional freighter services.
Mr Dixon said the result in the domestic flying business highlighted the success of the company’s strategy to co-ordinate network and capacity while delivering the appropriate product, service and economics for each market segment.
“The launch of Jetstar in May 2004 was the central plank in this domestic strategy and its EBIT of $19 million was ahead of our expectations. Jetstar will continue to grow in domestic leisure markets and will look for further opportunities as it moves towards a single fleet of new A320 aircraft,” he said.
Mr Dixon said the international market remained extremely competitive with substantial capacity increases being accompanied by heavy discounting. He said Qantas strategically increased its capacity to key international markets in the period. Whilst revenue growth did not match capacity in the half-year, product enhancements — including Skybed — position Qantas favourably for improved performance later in the year.
“Our strong brand, the market’s continued enthusiasm for the new Business Class Skybed, new routes to India and China and growth on existing core routes — including the new London service via Hong Kong — drive our strategies. However, our costs must be further improved if we are to compete successfully against the myriad carriers that are either subsidised or owned by their national Government,” he said
Mr Dixon said Qantas supported the further liberalisation of aviation markets where this resulted in balanced outcomes and genuine opportunities to compete.
Mr Dixon said, "We need liberalisation for our own growth and accept that this involves a mix of opportunities and challenges. However, the bilateral system of international air services arrangements is complex and there will not be effective reciprocity to compete in third markets unless liberalisation is sequenced carefully. This lies at the heart of our concern that Singapore Airlines should not be granted access to the trans-Pacific route at this time.”
Mr Dixon said excellent progress had been made in recent years to change the way the Qantas Group operated.
“The Sustainable Future programme on costs and efficiencies delivered savings totalling 7,595 million baht ($245 million) in the past six months and is on track to exceed the 15,500 million baht ($500 million) full year target. However, as we continue to invest we must also continue to address the legacy of our past and, in particular, the complex processes that have been built into our business models over decades,” he said.
“To this end we will, over the next three months, conduct a review of processes and activities, with a focus on processes that can be removed or redesigned. Qantas will expand the Sustainable Future program to co-ordinate these internal initiatives, including the Segmentation program and the process review. Delivering streamlined processes will be crucial to our future and this will result in Qantas obtaining greater efficiency out of its existing asset base and having an increased focus on core activities,” he said.
“Standing still is not an option in the aviation business. Our competitors are further reducing their costs by a variety of means, including bankruptcy protection in the USA, Government-mandated industrial reform in Asia and consolidation in Europe,” he said.
Mr Dixon said Qantas would continue to focus on profitable growth — a strategy that, in contrast to nearly all other legacy airlines, had produced 10,000 more jobs over the last eight years. Qantas would also continue to examine alternatives to source its services and products.
“We will source from the most suitable locations globally, while at the same time remaining committed to growing Australia-based businesses. The new cabin crew base in London, which will open later this month with over 400 flight attendants, is an example of this approach,” he said.
Group Revenue
Total revenue for the half-year was 198,400 million baht ($6.4 billion), an increase of 19,505.20 million baht ($629.2 million) or 10.8 per cent on the prior half-year. Excluding the unfavourable impact of foreign exchange rate movements, total revenue increased by 20,853.70 million baht ($672.7 million) or 11.6 per cent.
Net passenger revenue, including fuel surcharge recoveries, increased by 11,246.80 million baht ($362.8 million) or 7.9 per cent to 155,000 million baht ($5.0 billion) with Revenue Passenger Kilometres (RPK) growing 8.6 per cent and yield deteriorating by 1.0 per cent. Excluding unfavourable foreign exchange rate movements, passenger revenue was up 8.5 per cent reflecting the growth in RPKs and a marginal yield decline of 0.4 per cent, predominantly in the domestic market.
Non-passenger revenue increased by 22.4 per cent reflecting additional wet-leased freighter capacity, freight fuel surcharge, growth in outbound tours and travel, various service fees and charges and the release of surplus revenue provisions.
Expenditure
Total expenditure, including borrowing costs, increased by 10.6 per cent or 17,304.20 million baht ($558.2 million) to 179,800 million baht ($5.8 billion). This increase reflects higher fuel prices which, after hedging benefits, increased fuel costs by 5,059.20 million baht ($163.2 million). After adjusting for post-hedging fuel price increases, total expenditure was up by 7.5 per cent compared to Available Seat Kilometre (ASK) growth of 13.3 per cent.
Excluding the favourable impact of movements in foreign exchange rates, total expenditure, including fuel price rises, increased by 12.3 per cent. Manpower and staff related costs increased by 11.8 per cent, predominantly due to Enterprise Bargaining Agreement (EBA) wage increases of 3.0 per cent and a 5.2 per cent increase in full-time equivalent (FTE) employees. Lower FTEs compared to ASK growth reflects the continued progress being made under the Sustainable Future program to deliver productivity and cost efficiency benefits across the business. The result also reflects the partial provision for executive and staff bonuses, subject to the achievement of profitability targets for the full year.
Aircraft operating variable costs increased by 10.4 per cent or 3,580.50 million baht ($115.5 million), due to higher landing fees and en-route charges, security charges and other operating costs. Fuel costs increased by 32.3 per cent or 6,448 million baht ($208.0 million). The underlying average jet fuel price was 56.7 per cent higher than the comparative half-year, increasing costs by 12,090 million baht ($390.0 million).
However, hedging benefits were 7,030.80 million baht ($226.8 million) better than the previous half-year, significantly reducing the underlying fuel price rise to 5,059.20 million baht ($163.2 million), whilst favourable foreign exchange rate movements reduced fuel costs by 1,453.90 million baht ($46.9 million). The impact of greater flying increased fuel costs by 2,842.70 million baht ($91.7 million).
Depreciation and non-cancellable operating lease charges increased by 4.0 per cent or 821.50 million baht ($26.5 million) and included the accelerated write-down of modifications on some aircraft.
For media inquiries, please contact:
Kasemsri Kaewthammachai / Yuwadi Chombun
Qantas Public Affairs office
Tel: 02 231 6158-9, 01 611 4696
Email: [email protected] End.