Australia’s Qantas Airways Ltd posted a 17 percent drop in annual net profit, driven by gas prices and a weaker Australian dollar, but cheered investors with a A$400 million (S$375 million) share buyback and higher dividend.
Qantas also said it would keep capacity flat in line with demand in a slow Australian market.
“Looking ahead we’re feeling quite confident about this fiscal year,” chief executive Alan Joyce said.
Underlying pretax gain, the airline’s most closely watched measure, was A$1.30 billion (S$1.22 billion) for the year ended June 30, down from A$1.57 billion.
That was under a consensus estimate of A$1.36 billion, based on Refinitiv data, but investors were forgiving of the shortfall which was largely because of a one-off non-cash supply for things including employee leave provisions.
Revenue in the airline, which celebrates its 100th anniversary next year, rose 5 percent to A$17.97 billion. It intends to get back up 79.7 million shares in an off-market tender and announced a fully-franked final dividend of 13 Australian cents per share, up from 10 cents.
Qantas shares were up 4.5 percent in midday trade. The stock has outperformed those of peers Air New Zealand, Virgin Australia Holdings, Cathay Pacific Airways and Singapore Airlines over the united states.
Air New Zealand before on Wednesday reported a steeper 31 percent decrease in pre-tax gain to NZ$374 million, hurt by higher gas prices, weaker travel requirement and motor difficulties.
Qantas’ fuel prices rose 19 percent and are predicted to rise by another A$100 million in the current financial year, for which it is already fully hedged.
“It is a mixed bag, but there are certainly some reasons to be cheerful,” said Damian Rooney, director of equity sales at Argonaut.
“With a fantastic hedging structure and an advancement from the Aussie dollar they’ll have the ability to enhance,” Rooney added. “A buyback proves that they have a reasonably robust outlook, and it shows great capital management.”
LACK OF GUIDANCE
International airlines have cut capacity to Australia for the first time in a decade since the weaker currency makes it a less attractive market. The national market is growing at its lowest rate since the international financial crisis.
Joyce said the airline was visiting weakness in the price-sensitive domestic leisure market served by budget carrier Jetstar, but superior leisure demand and corporate demand remained stable.
Joyce bucked recent training and declined to provide investors with advice on forward bookings.
“We do not go into that amount of detail,” he told reporters. “What we’re doing is very much concentrated on handling capacity. The capacity settings we believe are in equilibrium.”
Qantas’ overall capacity is expected to rise 1 percent in the first half – flat to slightly down in domestic and rising 1.5 percent in international.
Qantas reservations to Hong Kong have dropped 10 percent after anti-government protests and the airline plans to cut capacity by 7 percent during the next few months,” Joyce said.