The Qantas Airways Limited (ASX: QAN) share price has dropped after the airline reported an impressive return to profit.
HY23 result
Here are some of the highlights from the result:
- Underlying net profit of $1.43 billion
- Statutory/reported net profit after tax (NPAT) of $1 billion
- Statutory profit / earnings per share (EPS) of 53.9 cents
- Net debt declined to $2.4 billion
- Share buyback of up to $500 million announced
Qantas explained that the drivers of the result were consistently strong travel demand, higher yields and cost improvements as its $1 billion recovery program that is nearing completion.
The airline achieved an operating profit margin of 16%, despite significantly higher fuel prices.
After spending $200 million on improving its operating performance, Qantas said it has been the most on-time “major domestic airline” for five months in a row.
Qantas also talked about adding more capacity, which “will put downward pressure on fares.”
In terms of overheads, the airline expects that the extra costs will “start unwinding” from this half and into the next financial year.
The company has made recent announcements about investing in its network, fleet and lounges, which it thinks will help deliver long-term shareholder value.
Outlook for the Qantas share price
The airline said that travel demand is expected to remain strong for the rest of FY23 and FY24.
In the second half of FY23, group domestic capacity is expected to increase from 94% to 103%, while international capacity is expected to increase from 60% to 81%.
Qantas suggested that fares are expected to moderate during the second half of FY23 as capacity increases, but will remain “significantly above FY19 levels”. Strong demand and higher fuel costs were blamed for this. The fuel cost for FY23 is expected to be $4.8 billion.
I think that Qantas has come flying out of the pandemic with very strong profitable operations. It’s improving its balance sheet and rewarding shareholders.
At the current Qantas share price, it may still be a good buy for the long-term if it can keep generating good profits. It’s 6% lower than it was before, but it’s still up over 30% over the last six months. I think there could be a better share price to buy at in the coming months.
