Authors: Lisa Barrington and Rishav Chatterjee
(Reuters) – Australian flag carrier Qantas Airways raised its expectations for first-half domestic revenue on Friday and said it was on track to resume dividend payments from the second half of the financial year, pushing the company’s shares to a record high.
Under the leadership of its up-to-date CEO and chairman, the iconic Australian brand is working to rebuild its reputation, which has been damaged over the past 18 months by legal, regulatory and customer issues.
The airline said domestic travel demand was stronger than expected and it also cut jet fuel costs in the first half of the year after global prices fell to about A$2.55 billion ($1.69 billion) from an earlier estimate of 2.7 billion Australian dollars.
The company’s shares rose as much as 1.6% to A$8.04 on Friday, hitting a record high for the second time in a week.
Qantas now expects revenue per available passenger kilometer for its domestic businesses to grow by 3% to 5% in the first half ended December 31 compared to a year ago, compared with a range of 2% to 4% reported in August.
Its international revenue per available seat kilometer was still expected to fall 7% to 10% as rivals restore capacity and airfares fall from post-pandemic highs.
Qantas chief executive Vanessa Hudson (NYSE:) said on Friday in a speech to the airline’s annual general meeting that the group’s first-half performance was in line with expectations.
“Jetstar has seen stronger than expected demand, while domestic Qantas load factors and corporate travel demand continue to improve year on year,” she said.
Hudson and up-to-date CEO John Mullen (NASDAQ:) said Qantas has no objection to Qatar Airways’ proposal to take a 25% stake in its main domestic rival Virgin Australia, saying the investment plan leaves the airline well-positioned to compete.
Qantas has previously lobbied the federal government, which still must approve the Qatari investment, against the Gulf carrier’s ultimately unsuccessful attempt to provide more flights to Australia.
PREVIOUS ERRORS
Hudson took over delayed last year from longtime CEO Alan Joyce, who was found responsible in an August external review for measures that alienated travelers, employees and shareholders, leading to a cut in his exit bonus.
Mullen said at the annual meeting that the airline is trying to learn from past mistakes.
The meeting was less dramatic than a year ago, when investors impeached then-CEO Richard Goyder over a series of crises and shareholders voted overwhelmingly to reject the airline’s executive compensation plans. All resolutions were adopted this year.
Mullen told shareholders that Qantas remains on track to restore fully disclosed dividends from the second half of the current financial year. It last paid a dividend in 2019, before international travel was halted due to the pandemic.
He said the airline did not previously have sufficient Swiss franc allowances, a mechanism to allow Australian investors tax relief on tax already paid by the company to pay dividends.
“Given the progress we have already made in restoring our reputation, supported by our strong balance sheet, the outlook for Qantas and Jetstar is truly positive,” Mullen said.
The company said the A$400 million share buyback is now 45% complete at an average price of A$7.23. The carrier expects it to be completed by the end of the year.
($1 = 1.5060 Australian dollars)
