The Qantas Airways Limited (ASX: QAN) share price rose 4% to $3.70 after the Flying Kangaroo today reported a 25% fall in profit for its most recent half year.
Here are the key takeaways from the Qantas result:
- Revenue fell 3.3% to $8.2 billion
- Profit fell 25.1% to $515 million, from $688 million (down 7.5% on an underlying basis)
- A 50% franked dividend of 7 cents per share was declared
- Jetstar grew profits 5%
Qantas is Australia's leading Airline operator, flying popular domestic and international routes. It also owns the Jetstar brand and makes money from freight services and its loyalty cards.
"Our transformation program has built a strong, sustainable business that generates returns throughout the economic cycle," CEO Alan Joyce said. "Qantas and Jetstar's domestic operations produced an outstanding result and Qantas Loyalty continued to thrive. It's a combination that keeps delivering and sets us apart from our competitors."
During the half, Qantas domestic reported a 4% fall in profits while the international division was affected by competition and reported a 23% reduction.
"The international market is tough because of capacity growth and lower fares, and Qantas International is not immune from those pressures," Joyce added. "But the work we've done on removing costs and making the business more efficient means Qantas International is outperforming its peers in the region."
Qantas is introducing the Boeing Dreamliner, seating just 236 passengers but providing a better experience for travellers, and high-speed Wi-Fi to its planes.
Looking ahead over its full 2017 financial year, Qantas plans to increase capacity marginally. It also expects fuel costs less than $3.2 billion, and up to $450 million from transformation benefits.
Should you buy Qantas shares?
Qantas is in a good paddock at the moment, with oil prices still low relative to historical levels. However, competition is always increasing and costs can be subject to any number of external drivers. Therefore, I would not invest in Qantas shares right now.
Do get me wrong, I think Qantas is probably the best Australian airline. But that does not make it a good investment.
