SYDNEY Australian flagship airline Qantas Airways Ltd swung to a record first-half profit, as appetite for travel grew faster than it could sell seats, but warned sky-high fares would moderate as it and competitors added more flights, sending its shares down 6 per cent.
The airline said it was buying back A $500 million $340.85 million of shares after it declared a turnaround from the initial COVID 19 lockdowns when it had cash to survive for just 11 weeks if it had not parked planes and stood down most of its staff without pay.
The rise in demand from a population that has been affected by the Pandemic restrictions has resulted in a number of fares and profits, as increasing mortgage payments, grocery prices and fuel bills are starting to curb spending power, according to the update.
It also gives a taste of the market that U.S. private equity firm Bain Capital must navigate if it proceeds with an initial public offering of domestic rival Virgin Australia this year. Air New Zealand Ltd also reported a swing to profit in the first half ended December 31 on Thursday, along with a muted outlook.
Qantas Chief Executive Alan Joyce said cost of living pressures would hit discretionary spending at some point but so far the airline expects robust demand into mid- 2024 at least.
Revenue per available seat RASK, which captures a combination of airfares and the percentage of seats filled, was 46 per cent higher than in the first half of 2019 before the epidemic hit, the airline said in an analyst presentation.
We've seen no relenting of the strong demand that Joyce told reporters. As more airlines can unlock capacity, demand chain for aircraft, labour availability, and training pipelines are things that will keep going down, so fares will keep going down. Qantas is facing delays of up to six months in new aircraft deliveries from Airbus SE, along with other airlines around the world. The Australian carrier said it would bolster its fleet by acquiring some older Airbus planes and exercising nine options for A 220 purchases to meet travel demand growth.
The airline didn't give any specific full-year profit guidance. The underlying profit before tax of A $1.43 billion for the six months end-December, from a A $1.28 billion loss a year earlier, was within its own forecast range of A $1.35 billion to A $1.45 billion.
The plunge in Qantas shares was compared to a slight decline in the broader market, as analysts welcomed an on-target profit but questioned the impact of moderating fares as the company sold more seats.
Citi analysts said the outlook for RASK is to reduce, however, off what we estimate to be elevated.