Qantas Easily Beats Analysts Predictions

[Wirraway]

Thursday February 19, 10:38 AM AEDT

Australia's Qantas H1 net profit up 1.5 pct

SYDNEY, Feb 19 (Reuters) - Australia's biggest airline, Qantas Airways Ltd , beat market forecasts with a small rise in first-half net profit on Thursday on the back of a stronger Australian dollar, cost cuts and increased traffic.

Striving to bring its cost base closer to that of its low-cost rivals, Qantas said it planned to shave a further A$500 million from its costs on top of the A$1 billion cost-cutting programme it already has under way.

The airline said market conditions were stabilising after the impact of SARS and the Iraq war and it was on track to achieve a year profit in line with the traditional split between its first and second halves. "Historically, Qantas earns 60 percent of its profits in the first half of the financial year. Trading conditions so far this year show that Qantas is on track to achieve a full-year profit in line with this trend," Qantas said in a statement to the Australian Stock Exchange.

Shares in Qantas, which is 17 percent-owned by British Airways Plc , rose 3.0 percent to A$3.74, their highest level in a year.

The airline clawed back from a six-month loss in the second half of 2002/03 -- battered by SARS, the Iraq war and tough domestic competition -- to post a net profit of A$357.8 million ($281.7 million), up 1.5 percent from A$352.5 million a year ago.

The results beat analysts' expectations for a A$322.4 million net profit for the airline, which plans to launch its budget carrier Jetstar in May as it fends off competition from Richard Branson's discount airline Virgin Blue .

FOREX GAINS

The airline said favorable foreign exchange moves had a A$45.2 million positive net impact on its results, and helped alongside hedging to cut its fuel bill by 20 percent or A$165 million.

Earnings from domestic operations rose 64 percent on an earnings before interest and tax (EBIT) basis to A$323.9 million over the half-year, while international EBIT dropped A$61.3 million to A$200.1 million as the market struggled to claw back.

Qantas said its share of the domestic market now stood at 66.2 percent and it would draw its "line in the sand" at 65 percent in its struggle to defend its share against Virgin Blue.

It plans to announce details of the route network and fare structure next month for its new Jetstar venture which should have a lower cost base than that of Virgin Blue, Qantas said.

The airline said it has increased its cost-cutting target for the full year to A$500 million from A$350 million and extended its total A$1 billion cost-cutting programme by A$500 million and stretched it over another year.

Airline operators throughout the region have begun to restore capacity after slashing flights when Severe Acute Respiratory Syndrome broke out in April to June last year. ($1=A$1.27)


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Dow Jones
Thursday February 19, 9:46 AM AEDT

Australia's Qantas/Earnings: More Stable Market

SYDNEY (Dow Jones)--Australia's Qantas Airways Ltd. (QAN.AU) said Thursday that net profit for the first half ended Dec. 31 rose 1.5% to A$357.8 million from A$352.5 million in the previous corresponding period.

This compared with a range of analysts forecasts for a net profit of A$282 million to A$336 million, with the consensus around A$318 million.

Qantas said it would pay an interim dividend of 8.0 cents a share, steady with the previous corresponding period.

"Historically, Qantas earns 60% of its profits in the first half of the financial year," it said in a statement.

"Trading conditions so far this year show that Qantas is on track to achieve a full-year profit in line with this trend."

Chairwoman Margaret Jackson said the airline's businesses returned to profitability during the half following the impact of the Iraq war and the SARS crisis in Asia.

"This has put us in a good position to take advantage of what appears to be a return to more stable market conditions," she said, adding that the company had continued to invest in new products, aircraft and technology.

However, chief executive Geoff Dixon said a 4.4% fall in revenue against the previous corresponding period was entirely due to the continued impact of SARS and the Iraq war.

The revenue fall was offset by a 6% reduction in expenditure, Dixon said.

He added that Qantas was on track to exceed its A$350 million cost reduction target for the full year ending June 30 and that the program would be extended by another year and the its target by another A$500 million.

Qantas expects to launch its low cost carrier Jetstar in May and reveal its route and fare structure later this month.

Dixon said Jetstar will have a lower cost base than its rival Virgin Blue Holdings Ltd. (VBA.AU).

Earnings before interest and tax from international operations were A$196.7 million, a fall of A$67.2 million from the previous corresponding period.

For domestic operations, EBIT was A$270.9 million, an increase of 69.2% on the year ago result.

In early trade, Qantas shares were up 2.2% or 9 cents to A$3.72. A number of analysts expect the stock to reach A$4.00 over the next 12 months. Virgin Blue shares rose 1.6% to A$2.56.

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[Tuner 2]

Asx announcement:
http://www.asx.com.au/asxpdf/20040219/pdf/3kp7dkl83qcc3.pdf

[Keg]

Qantas said its share of the domestic market now stood at 66.2 percent and it would draw its "line in the sand" at 65 percent in its struggle to defend its share against Virgin Blue.

Funny but I thought that 70% was the 'line in the sand'?!?!?! ;) :p :}

[Wirraway]

Fri "The Australian"

Clipped wings lift Qantas
By Steve Creedy, Aviation writer
February 20, 2004

http://www.theage.com.au/ffxImage/urlpicture_id_1077072780214_2004/02/19/geoff_dixon,0.jpg
Qantas says its Sustainable Future Program will trim $500 million in costs by June 30.
Picture: Reuters

QANTAS is expecting a record full-year after-tax profit of almost $600 million after a strong traffic recovery and reduced costs helped it emerge from the SARS crisis with a surprisingly strong first-half result.

The unexpectedly strong $357.8 million net profit was up slightly from last year's result of $352.5 million but well ahead of analysts' expectations of about $315 million.

Qantas shares shot up 14c, to close at $3.77, as the airline declared an interim dividend of 8c.

The market approval came as Qantas confirmed it was still eyeing potential investments in airlines beyond its bid for a 22.5 per cent stake in Air New Zealand.

"We've been looking at other opportunities," Qantas chief executive Geoff Dixon confirmed without elaborating.

The first-half accounts for about 60 per cent of the airline's profits and it said trading conditions so far this year showed it was "on track to achieve a full-year profit in line with the trend".

That would put the full-year after-tax result at $596 million, up from $343.5 million last year.

The airline attributed the unexpected result to a strong domestic performance coupled with improved efficiency and an international recovery in the second half of the six-month period.

A 4.4 per cent fall in revenue to $5.8 billion was almost all attributable to the first three months of the period as the airline weathered the aftermath of the SARS crisis and the war in Iraq.

Mr Dixon said management was now confident about industry growth prospects and Qantas could participate profitably in that growth.

"We see (revenue growth) coming from all segments," Mr Dixon said. "We believe there's growth in our domestic operations, particularly when Jetstar starts and goes to that lower end of the market. Qantaslink continues to do well and our international operations are coming back."

But Mr Dixon said a $7 billion investment in aircraft, products and technology by mid-2006 made it imperative the airline continue to remove inefficiencies.

He said Qantas would increase its "Sustainable Future" cost-cutting target by a further $500 million to $1.5 billion over three years.

The additional cost-cutting will not involve further layoffs at the airline. Executives said savings would be achieved by increased efficiencies.

But staff wage increases would be held to "about 3 per cent" despite union pushes to give workers a bigger slice of the profits.

"The market will love this result - it's clean, it demonstrates its cost-cutting program is working," said Citigroup Smith Barney transport analyst Jason Smith, who has a price target of $4.50 a share.

"And it highlights how well positioned Qantas is for the rebound in international growth, and that Jetstar is real and going to take on Virgin Blue directly and very profitably."

The strong dollar played a modest role. It combined with more efficient aircraft to cut fuel costs by 20 per cent but the net gain from favourable foreign exchange movements for the period was just $45.2 million.

International operations were hit hard by the SARS aftermath with earnings before interest and tax down $61.3 million to $200.1 million.

But with booking returning to pre-SARS levels and an estimated growth in outbound traffic of 5 per cent, Qantas is adding capacity. Mr Dixon said he was "quite bullish" about the segment's prospects.

Domestic operations, including Qantaslink, added $323.9 million in EBIT, up 63.7 per cent on the year before.

Business units Qantas Holidays and Qantas Flight Catering recorded solid performances, with EBIT at Holidays up 24.4 per cent to $24 million and earnings at catering rising 27.3 per cent to $46.6 million.

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