Qantas Airways Limited (ASX: QAN) shares are down 3% after the airline reported its FY19 half year result.
Qantas is Australia’s leading airline. It was founded in the Queensland outback in 1920, the Qantas name was originally Queensland and Northern Territory Aerial Services. The company operates two main airlines – Qantas and Jetstar – and subsidiary businesses including other airlines, businesses in specialist markets such as Q Catering, Qantas Freight Enterprises and the popular Qantas Frequent Flyer program. It employs some 30,000 people with around 93 per cent of them based within Australia.
Here’s What Qantas Reported
Qantas said that revenue grew by 5.8% to $9.2 billion. However, statutory profit fell by 16.3% to $498 million and underlying profit before tax declined 18.7% to $780 million.
Qantas would have been able to report profit growth if it weren’t for the fuel cost rising by $416 million to $2 billion.
The airline said that the domestic business achieved another record profit of $659 million, which was up 1%. Qantas Domestic achieved EBIT growth of 1% to $453 million (click here to learn what EBIT means) with capacity being adjusted. Jetstar also achieved a record result.
Qantas International revenue grew by 7% to $3.7 billion but EBIT declined by 60% to $90 million due to a rapid increase of fuel costs amounting to $219 million that couldn’t be quickly recovered.
Qantas Fleet
Qantas International took delivery of three 787-9s with another six arriving in the first half of FY20 which will take the total to 14. This means the accelerated retirement of 747s, another three will be removed by the end of FY19, leaving seven remaining.
Qantas Dividend and Buy-Back
Not only did Qantas announce a $500 million shareholder return in August 2018, but it has announced another $500 million today consisting of an increase to the interim dividend to 12 cents per share (up 71% from 7 cents) and an on-market buy-back of up to $305 million.
Qantas management comments
Qantas CEO Alan Joyce said: “Across our network, capacity is broadly meeting demand, including sifts to capitalise on the continued strength of the resources sector.”
Is Qantas a buy?
The airline said that group capacity growth is expected to be flat across the domestic and international businesses in the second half.
FY19 fuel costs are expected to be around $3.9 billion, an increased of 21% compared to FY18 with two thirds of it occuring in the first half. However, FY19 transformation benefits are expected to be at least $400 million.
Qantas has made a great recovery over the past five years and I can’t see oil prices rising much higher so Qantas should be able to generate regular profit. But, I don’t think it necessarily be a market beater due to potential competition – its service is somewhat of a commodity. I’d rather go for the ASX shares in the free report below.
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