Qantas is expecting an underlying profit before taxes between $1.2bn and $1.3bn for the first half of financial year 2023 (FY23). This follows five consecutive half years of heavy losses due to the pandemic and cumulative statutory losses of $7bn.
The airline expects the net debt to fall to between $3.2bn and 3.4bn on December 31, 2022, below the bottom of the target range of $3.9bn.
Qantas Group CEO, Alan Joyce, said: “It’s been a really challenging time for the national carrier but today’s announcement shows how far we’ve come. Since August, we’ve seen a big improvement in our operational performance and an acceleration in our financial performance.”
Just last month, Qantas commenced an on-market share buyback worth up to $400 million. This buyback is now 26% complete with around 20 million shares purchased at an average price of $5.24 per share.
The airline is expecting a strong travel demand in the upcoming winter season pushing the carrier to invest more in increasing capacity and meanwhile strengthening the balance sheet. The airline has so far reported a strong domestic travel demand across all categories with revenue intakes for business purposes over 100% of pre-COVID levels and leisure intakes over 130%.
“It’s clear that maintaining our pre-COVID service levels requires a lot more operational buffer than it used to, especially when you consider the sick leave spikes and supply chain delays that the whole industry is dealing with. That means having more crew and more aircraft on standby and adjusting our flying schedule to help make that possible until we’re confident that extra support is no longer needed,” Joyce added.
Yields from international markets are particularly strong but are expected to moderate as other carriers steadily increase capacity, the airline said.
Backing on the financial recovery, Qantas has also announced a change to the wage policy covering around 20,000 employees. The airlines will be increasing the wages upward from 2% to 3% i.e., an extra $40 million per annum before compounding. The increase will automatically apply to around 5,000 employees who have already agreed to 2% as part of their Enterprise Bargaining Agreements.
Commenting on the salary hike, Joyce said, “The fact our financial recovery has accelerated means we can invest more in rewarding our employees, who are doing an amazing job. We’ll spend an additional $40 million a year on permanent pay increases for our people on top of the $200 million in cash and share bonuses we’ve announced for our people.”
This wage increase is in addition to the $5,000 recovery boost announced in June and the 1,000 share rights awarded to non-executive staff as part of a retention program, worth a further $5,000 on the current share price.
Qantas’ operational performance has continued to improve and is now at or around pre-COVID levels in the first half of October. Cancellations fell from 4% in August 2022 to 2.4% in September 2022. In October 2022 so far, only 1.7% of flights have been canceled, which is market-leading and better than pre-COVID levels, the airline said in a release.
“Qantas’ operations are largely back to the standards people expect, and Jetstar’s performance has improved significantly in the past few weeks and will keep getting better with the extra investments we’re making,” Joyce concluded.