This is Qantas' best first-half performance since 2010 and an improvement of AU$619 million compared with the same period last year. The Group achieved a 4.8% reduction in comparable unit cost and a 2.1% increase in revenue to AU$8.1 billion, driven by rapid progress with Qantas Transformation and recovering yields and loads in a stabilising environment. The Group is now targeting AU$675 million of transformation benefits in financial year 2015, up from the previous target of AU$600 million. Combined with the AU$204 million in benefits realised in financial year 2014, this will result in total benefits of at least AU$875 million by June 30, 2015.
All operating segments of the Qantas Group were profitable in the half, at an Underlying Earnings Before Interest and Tax level. Qantas International was profitable for the first time since the Global Financial Crisis, with Underlying EBIT of AU$59 million representing a turnaround of AU$321 million on the prior corresponding period. The business is expected to achieve its target -- announced in 2011 -- of a return to profit in financial year 2015. In the domestic market, Qantas and Jetstar reported combined Underlying EBIT of close to AU$300 million. Qantas CEO Alan Joyce said the result showed that the Group was executing the right plan with discipline and speed. "The decisive factor in our best half-year result for four years was our complete focus on the Qantas Transformation program," Joyce said.
Qantas is de-leveraging its balance sheet and increasing its return on invested capital. The Group's cash flow improved rapidly compared with the same period last year, with cash generated from operations up 44.8% to AU$1 billion. Positive net free cash flow was AU$194 million. Liquidity remains strong at AU$3.6 billion, comprising AU$2.9 billion in cash and AU$720 million in undrawn facilities. Approximately one third of the Group's fleet of aircraft is debt-free and, after a period of extensive fleet renewal, the Group's average scheduled passenger aircraft age is 7.2 years - the youngest in more than two decades. Planned capital expenditure is unchanged at AU$900 million for both financial year 2015 and financial year 2016.
Qantas Domestic reported Underlying EBIT of AU$227 million, an improvement of AU$170 million compared with the same period in financial year 2014.
The business realised transformation benefits of AU$127 million in the first half and achieved a 2.5% improvement in revenue per available seat kilometre, with a stabilising operating environment supporting yield and load recovery. Comparable unit costs were reduced by 4.1% on capacity reduction of 2.4%. Increased fleet utilisation will remain a focus in the second half. Customer satisfaction was at record levels in the December quarter, reflecting ongoing investment in aircraft, lounges, product and training, including the introduction of the new A330 product for core east-west and east coast routes.
Qantas Domestic retained an 80% revenue share of large accounts in the Australian corporate travel market, including 113 account renewals, 42 new accounts, 16 accounts won back from the competition, and four accounts lost.
Qantas International reported Underlying EBIT of AU$59 million, a turnaround of AU$321 million compared with the same period last year. Of the turnaround, AU$159 million was attributable to cost and revenue initiatives under Qantas Transformation. A further AU$100 million was attributable to reduced depreciation following the non-cash writedown of the Qantas International fleet in August 2014. Comparable unit costs were reduced by 3.8% and revenue was increased by 4.8%.
A significant increase in fleet utilisation enabled Qantas International to add seasonal or permanent capacity to destinations including Los Angeles, Dallas/Fort Worth, Vancouver, Santiago, Honolulu and Auckland. The business continued to form new airline partnerships and expand existing partnerships in North America, South East Asia and Greater China, giving customers more destinations and increasing the Group's reach in key markets. Customer satisfaction has risen by 30 percent since financial year 2012 and remains at near-record levels. This period has seen upgrades to the B747 and A380 fleets, network improvements, the Emirates partnership, and new lounges in Singapore, Hong Kong and Los Angeles. Competitor capacity growth in the international market has slowed significantly from the compound annual growth rate of 7 percent seen in the five years to financial year 2014, with two per cent growth in the first half and a small contraction forecast in the second half.
The Jetstar Group reported Underlying EBIT of AU$81 million, an improvement of AU$97 million compared with the same period last year. Domestically, Jetstar achieved EBIT of AU$63 million, driven by improved yields and loads and a continued focus on management of costs and capacity. Jetstar International achieved strong earnings of AU$51 million, benefitting from network changes and the introduction of the Boeing 787 which will operate all Jetstar's long-haul flights from September 2015, delivering an improved customer experience and lower unit costs. The Jetstar brand continues to grow in Asia. Jetstar-branded airlines now fly to 66 destinations across 16 countries in the Asia Pacific region. JetStar improved performance in the first half relative to the prior corresponding period, with a AU$13 million reduction in Qantas' share of losses.
Singapore-based Jetstar Asia was profitable in the second quarter, following significant capacity restructuring in the market.
Qantas Loyalty reported record half-year Underlying EBIT of AU$160 million, up 10 percent on the prior corresponding period. The Qantas Frequent Flyer program added more than 400,000 new members in the half to reach a total membership of 10.5 million. Billings were up 6% as Qantas Loyalty continued to diversify its customer base and revenue streams through growth ventures. Activations of the Qantas Cash travel money and membership card were up 27 percent from the second half of financial year 2014, with approximately AU$800 million loaded on the cards. The Aquire loyalty program for SMEs is also growing strongly. Over 55,000 businesses have joined Aquire and the program now has 21 partners. Overall, gross profit from adjacent ventures -- including Qantas Cash, Accumulate and Qantas Golf -- was up 70% in the half.
Qantas Freight reported Underlying EBIT of AU$54 million, an improvement of AU$43 million and its best first-half result since 2006. International cargo markets continued to recover, accounting for AU$44 million of Underlying EBIT, with the China-US and US-Australia markets performing well.
In 2015 Qantas Group capacity will increase by 1.5 to 2% in the second half of financial year 2015 compared with the second half of financial year 2014;
The Group's full-year underlying fuel costs are expected to be no more than AU$4 billion at current prices; The Group's full-year depreciation and amortisation expense is expected to be AU$1.1 billion; all operating segments are expected to be profitable in financial year 2015.