24-Aug-2016 12:26 PM

Qantas Group: Record FY2016 results reflects group's portfolio advantages

Qantas Group reported (24-Aug-2016) its record FY2016 financial performance "reflects the advantages of the Group portfolio". Approximately two-thirds of earnings were generated from the company's "strong, stable" domestic and loyalty businesses, and approximately one-third from its international business. The carrier noted it is witnessing "increasing potential earnings and resilience to volatility". Business unit highlights:

  • Qantas Domestic: Business "continued to navigate the transition in the Australian economy", reporting an AUD121 million (USD92 million) drop in revenue from resources markets but higher revenue in non-resources markets, and capacity reductions limiting the impact of weaker demand at the end of the year. Qantas reported customer satisfaction was at "record levels", helped by upgrades to its A330 and Boeing 737 fleets and continuous investment in service training;
    • EBIT rose 20% year-on-year, and operating margin was 10.1%, up 1.9 ppts;
  • Qantas International: Unit has re-allocated capacity from trans-Pacific routes and the domestic market to destinations including New Zealand, Singapore, Hong Kong, Japan, the Philippines and Indonesia, to meet strengthening business travel and tourism in Asia. Overall capacity on the Pacific routes has been increased under an expanded partnership with American Airlines, which saw Qantas return to San Francisco and American to Sydney and Auckland. This "agile approach to growth" will continue in FY2017. The Group will monitor broader economic conditions, while continuing to deepen strategic partnerships with American Airlines, Emirates and China Eastern;
    • Underlying EBIT was a record AUD512 million [USD389.4 million], up 92%. EBIT result was an improvement of more than AUD1 billion (USD760 million) compared with FY2014. Qantas International reduce costs and increase revenue while growing capacity to meet demand through a 5% increase rise in aircraft utilisation. Unit costs excluding fuel declined 4%. Operating margin was 8.9%, +4 ppts;
  • Jetstar Group: Following completion of the renewal of Jetstar’s long-haul fleet with Boeing 787-8, investment is focused on continuing to improve the airline’s customer experience and online sales channels. Jetstar units in Asia delivered an AUD85 million (USD64.3 million) improvement, including a first full-year profit for Jetstar Japan;
    • Operating margin for the Jetstar Group was 12.4%, up 5.8 ppts, helped by a 3% reduction in unit costs (excluding fuel). Underlying EBIT was AUD452 million (USD343.8 million), +97%;
  • Qantas Loyalty: Approximately 45% of revenue growth came from non-core ventures, while the core consumer and business loyalty programs continued to perform strongly. Qantas Frequent Flyer membership increased 580,000 to 11.4 million. Improved products and partnerships have been announced, including an expanded arrangement with Woolworths. Loyalty continues to invest in new ventures and grow existing ones, taking a strategic stake in Data Republic, alongside Westpac and NAB, and launching Qantas Assure, a health insurance venture with nib;
    • Underlying EBIT was AUD346 million (USD263 million) (+10%). Revenue increased by 6.7%, with margins of 23.8%, +0.7 ppts.
  • Qantas Freight: Results reflects difficult global cargo markets and the end of favourable legacy agreements with Australian Air Express, impacting yields. New long-term deals have been signed with Australia Post and Toll, the country’s two biggest freight customers, for the domestic market. Qantas Freight is also pursuing new opportunities internationally, in particular on triangular AustraliaChinaUS routes;

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