(Reuters) – Sydney Qantas Airways Ltd., Australia’s national carrier, soared to a record first-half profit as demand for travel outpaced its ability to fill seats, but cautioned that sky-high prices would ease as it and rivals added more flights, sending its shares down 6%.
The so-called “flying kangaroo” also announced that it would buy back A$500 million ($340.85 million) in shares as it declared a turnaround from the shock of the initial COVID-19 lockdowns, when it had enough cash to last only 11 weeks if it had not parked planes and laid off most of its employees without pay.
It also provides a taste of the market that US private equity company Bain Capital will have to negotiate if it moves with an IPO of local rival Virgin Australia this year. On Thursday, regional competitor Air New Zealand Ltd posted a profit swing in the first half concluded Dec. 31, along with a muted forecast.
Qantas CEO Alan Joyce said cost-of-living constraints would impact discretionary spending “at some stage,” but the carrier anticipated robust demand until at least mid-2024.
According to an analyst presentation, revenue per available seat kilometre (RASK), which includes prices and the proportion of seats occupied, was 46% greater in the first half of 2019 before the epidemic struck.
“We’ve seen no relenting of the robust demand so far,” Joyce told reporters. “Fares will continue to fall as more carriers open capacity, which is dependent on factors such as aircraft supply chains, labour access, and training pipelines.”
Qantas and other carriers worldwide have reported delays of up to six months in new aircraft orders from Airbus SE (OTC:EADSY). To help meet rising travel demand, the Australian airline said it would add some earlier Airbus aircraft to its inventory and exercise nine options for A220 acquisitions.
The airline provided no precise profit estimate for the entire year. Its core profit before tax of A$1.43 billion for the six months ended December 31, up from a loss of A$1.28 billion the previous year, was within its own projected range of A$1.35 billion to A$1.45 billion.
Analysts hailed an on-target profit but questioned the effect of moderating prices as the company sold more seats, causing Qantas shares to fall in comparison to the wider market.
“The outlook for RASK is to decline, but from what we assess, it is at elevated levels,” Citi analysts wrote in a client note.
1 US dollar equals 1.4669 Australian dollars.
