Qantas continues overdue restructuring with fleet impairment worsening a sour AUD646m pre-tax loss

By his own admission, Qantas CEO Alan Joyce is well past thinking he has won the popularity contest. His calling however is not how people see him but rather securing a future for Australia's over-loved, and previously much-neglected, airline. Mr Joyce inherited an airline that was privatised from government ownership but never shaken of its legacy habits. It was easy for predecessors to avoid taking surgical action: Qantas had the full service domestic market to itself, and now-household names like Emirates and AirAsia X were not yet in the fray. Domestic profits subsidised steadily eroding internationals services. Then the world changed; international performance has deteriorated and the domestic cash cow is under attack from a resurgent Virgin Australia.

There were factors outside of Qantas' control that led to its FY2014 underlying loss of AUD646 million, but that also included Qantas adopting a flawed strategy in its domestic capacity war. A more rational Qantas is calming down and the gains have been immediate. Qantas expects a 1H2015 profit, implying that the disastrous 2014 was not the terminal decline that some have trumpeted. And nor does Qantas need to sell its prized loyalty division. The pre-tax loss was dragged down by the shock headline figure - with just a touch of spin - of a post-tax loss of AUD2.8 billion. With that number behind them, Qantas can only look good now. That non-cash technical adjustment was driven by a one-off AUD2.6 billion write-down of its international fleet, confirming long-held views the fleet was over-valued but never previously addressed.

Driving the write-down is a change in corporate structure that Qantas expects will make it easier for its international division to receive foreign investment. On this investment prospect there is no timeframe or clear suitor; CEO Alan Joyce talks of a "long term option". Perhaps this move is driven less by interest than by a need to be seen as having secured options out of the public, and ultimately unsatisfactory, ownership debates in Canberra.