Hold on–is Qantas dying or highly profitable?

Qantas 747
Sunset or sunrise for Qantas? Photograph: AirSpace user flcriminal


At first glance Qantas’s announcement that it expects to make $83m-133m this half for an annual profit before tax of A$500-550m–a 1.07-1.18% increase from last year–seems incompatible with statements four months ago effectively predicting the end of the airline, let alone its claims it cannot afford salary increases.

But the devil is in the details, and the breakdown of that profit will be released on 24 August. If the current trend continues, a significant portion of that profit will be delivered by the frequent flyer programme (last year it accounted for 70% of the profit) and made possible by the airline’s QFutures cost-cutting campaign delivering a total of $1.5b of savings over three years.

Already Qantas has warned its international flying this year amounts to $200m in losses, an amount expected to be turned around over the next few years as Qantas re-evaluates the group’s long-haul strategy.

The $500-550m figure includes a $206m write-down for weather events: $95m from the floods and cyclones in Queensland, $72m from the Japan earthquake and tsunami, $11m from the Christchurch earthquake, and $21m–up to Monday–from the Chilean volcanic ash.

Also included is a settlement payment of A$95m from Rolls-Royce over Trent 900 failures on the Airbus A380 fleet. The settlement ends Qantas’s lawsuit again the engine manufacturer, who Qantas preferred to reach a commercial agreement with and was prepared to wait to achieve a favorable outcome.

Qantas said A380 disruptions had an A$55 million cost impact in the first half of its financial year and expected a further $25m impact in the second half of the year for a total of $80m.



Ironically, a depressed Qantas is delivering an exuberant profit while a happy-go-lucky re-branded Virgin Australia is bleeding all the red that used to adorn its jets.

Leave a Reply