Qantas today announced a profit after tax of $153.5 million for the half-year ended 31 December 2001, a result that is 41.6 per cent lower than the previous corresponding period.
The profit before tax was $231.3 million, down 44.5 per cent.
Qantas Chairman Margaret Jackson said the six months to 31 December 2001 had been the most tumultuous in the history of aviation, with the terrorist attacks on 11 September and the collapse of Ansett, and in this difficult period Qantas` financial performance had been outstanding. “It is impossible to directly compare the performance of this six months to the prior period because of the external factors such as 9/11, Ansett and the Olympics. “However, thanks to the hard work and dedication of our people we have performed better than just about any airline in the world,” she said
The Directors declared a fully franked interim dividend of 8 cents per share, and advised that the Dividend Reinvestment Plan will continue to operate for this dividend. It is the Board`s current intention that the annual dividend payout ratio will be about 60 per cent.
Qantas Chief Executive Officer Geoff Dixon said conditions in the aviation industry had been difficult before 11 September 2001. “At the beginning of the period, the Australian and international economies were slowing, the Australian dollar was weak and jet fuel prices were high. Added to this was the heavy discounting in the domestic market which saw two of the four domestic airlines collapse,” he said.
Mr Dixon said that after 11 September the demand for international travel fell dramatically, up to 30 per cent on some key routes. “This was the prime reason for our international operations, which represent 75 per cent of Qantas` business, recording an EBIT loss of $15.5 million compared to an EBIT contribution of $285.9 million in the previous corresponding period. “The sharp decline in the profitability of our international operations far outweighed the increased profitability of our domestic operations after the collapse of Ansett. Domestic operations contributed $180.1 million in EBIT, an increase of $62.0 million.”
Mr Dixon said Qantas had moved quickly, but at significant cost, to provide air travel for Australians following the collapse of the Ansett Group. “We carried 50,000 stranded Ansett passengers for free and another 65,000 at greatly reduced fares. The cost of carrying these passengers and the cost of wet leasing aircraft to cater for the shortfall in domestic capacity was over $60 million.”
Mr Dixon said while Qantas was one of the world`s best performing airlines, the industry both in Australia and internationally was under significant pressure. “There are signs of increased demand for international travel in some markets. However, this is predominantly in the leisure sector and this is impacting yields. “Growth in the domestic market is depressed. The capacity planned for the market over the next 12 months by Qantas, Virgin Blue and a remodelled Ansett will result in an extremely competitive and aggressive environment.”
Mr Dixon said trading in the first six weeks of 2002 indicated Qantas was still on track to deliver a full year profit before tax in line with last year`s result of $550 million. “However, this could prove difficult if there is further volatility in the market,” he said.
Mr Dixon said it was imperative that Qantas worked closely with its people and with Unions to ensure that its productivity as it went forward better matched both its domestic and international competitors. “We cannot have a cost base out of line with our domestic and international competitors. We face a period where many of our competitors are achieving substantial cuts to their cost base because of the aftermath of 11 September or by going into bankruptcy or administration. Others are being restructured by going back into Government ownership.”
Mr Dixon said Qantas had taken some major steps in the past six months to provide a platform for a profitable future when stability was restored to the industry. These steps included:
- the withdrawal from poorly performing international routes and reduced flying to other destinations;
- a ramp up in capacity in the domestic and regional markets to establish a strong presence throughout Australia;
- the seeking of a wage pause from its employees and greater productivity in future negotiations;
- the purchase and phased introduction from this month of 15 New Generation single-class Boeing 737-800 aircraft for domestic routes (options have been taken on another 60 aircraft);
- the deferral of the purchase of three A330 aircraft and the redeployment of some international aircraft to permanent domestic flying;
- the launch in September of Australian Airlines on Asian routes where Qantas cannot be competitive;
- significant product improvements, including a $50 million upgrade of Qantas Club lounges as well as new interiors (including in-seat videos in all classes) in the 747-400 fleet;
- the raising of $663 million in equity to provide stability to the balance sheet and ensure that gearing levels remain one of the lowest in the industry.