Qantas Group upgrades profit expectations for first half of full-year 2023

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Continued strength in travel demand has resulted in the Qantas Group upgrading its profit expectations for the first half of full-year 2023 (FY23).

The Group now expects an Underlying Profit Before Tax of between AU$1.35 billion and AU$1.45 billion. This represents a AU$150 million increase to the profit range given in early October 2022.

Fuel costs remain significantly elevated compared with FY19 and are expected to reach approximately AU$5 billion for FY23, which would be a record high for the Group despite international capacity at around 30% below pre-COVID levels.

Operational performance has continued to improve, with Qantas ranking as the most on-time domestic airline in October. The AU$200 million investment in rostering additional staff, continued recruitment and reserve aircraft will help maintain these levels during the latest wave of COVID infections in the community and into the busy Christmas period, as well as limiting the impact of extreme weather (especially wind) in November.

The Group’s net debt is now expected to fall to between an estimated AU$2.3 billion and AU$2.5 billion by December 31, 2022. This is around AU$900 million better than expected in the most recent update, due largely to the acceleration of revenue inflows as customers book flights on Qantas, Jetstar and partner airlines into the second half and beyond, as well as deferral of approximately AU$200 million of capital expenditure to the second half.

Around 60% of the AU$2 billion in COVID-related travel credits held by the Group have now been redeemed by customers. Total credit usage is consistent at a rate of circa AU$70 million a month and new initiatives will be announced shortly to encourage full use of remaining credits over the next year.

Of the AU$400 million share buyback announced in August 2022, 76% is now complete at an average price of AU$5.66. Low levels of net debt put the Board in a position to consider future shareholder returns in February 2023 consistent with the Group’s financial framework and phasing of capital expenditure for fleet renewal.

The Group recently finalised a three-year agreement with Jetstar pilots as part of its improved pay policy and expects to reach in-principal agreements with others in coming weeks. More than 6,500 employees, or 33% of those covered by an enterprise agreement, have now signed up to a post-COVID EBA. The Group remains on-track to share the benefits of the recovery with around 20,000 non-executive employees through a AU$5,000 boost payment and up to 1,000 Qantas shares (currently worth approximately AY$6,000), subject to key conditions being met.

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