Qantas ekes out A$6 milllion profit in FY2013

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Qantas recorded an Australian dollar (A$) 6 million ($5.38 million) full year net profit for the 2013 financial year, turning around a loss of A$244 million recorded a year earlier despite poorer earnings from key business segments.

The Qantas group overall recorded revenue of A$15.9 billion, up marginally from A$15.7 billion recorded the year prior. Expenses also increased by A$71 million to A$15.5 billion.

Group underlying earnings before interest and tax (EBIT) improved by 40% to A$372 million.

Qantas Domestic reported a 21% fall in underlying EBIT to A$365 million, dragged down by an 8% growth in total capacity in the domestic market. It was also impacted by a A$77 million carbon tax charge.

Qantas International halved its full-year EBIT loss from A$484 million last year to A$246 million, despite revenue falling by 5% to A$5.5 billion. That was largely the result of the airline cutting capacity as it rationalized its route network and retired five Boeing 747-400s

"We have made considerable progress with our turnaround plan for Qantas International and we remain on track towards our target for the business to return to profit in FY15," says chief executive Alan Joyce. "The progress has come in a tough competitive environment with high fuel costs and rapid capacity growth from competitors."

Jetstar recorded a 32% fall in EBIT to A$138 million, which Qantas attributed to lower earnings from its Australian operations due to heightened competition, as well as startup costs for Jetstar Japan and Jetstar Hong Kong.

"Jetstar continues to generate strong earnings for the Group through our domestic dual-brand strategy and successful ancillary revenue model," says Joyce. "At the same time, we are building Jetstar in Asia, positioning the brand for future success across the region."

Compared to the year prior, group yield excluding foreign exchange impact decreased by 2% to A$0.10 cents per RPK, as capacity measured in ASKs remained static, while RPKs were 1% lower. Revenue seat factor came in at 79.3%, 0.8 percentage points lower.

Qantas Loyalty, which represents its frequent flyer operations, grew its EBIT by 13% to A$260 million.

Joyce says that Qantas's extensive partnership with Emirates, which started in April this year, has had a positive impact on the business segment.

Qantas Freight's EBIT was down by 20% to A$36 million as it decreased its international capacity. Over the year, Qantas also divested its stake in domestic business Star Track Express and acquired the remaining 50% stake in Australian air Express, making it a fully-owned subsidiary.

Overall, the Qantas group's net fleet increased by four aircraft over the year as it inducted 24 new aircraft in the fleet, retired 11 and returned nine aircraft on expiry of their leases.

Joyce declined to give profit guidance for the coming financial year, noting that the airline expects that "trading conditions will remain challenging."

He adds that at current market rates, fuel costs over the first half of the 2014 financial year will increase by A$160 million.

"There are many challenges ahead, but we have an outstanding aviation business - and we have a clear strategy to build an even stronger Qantas Group," says Joyce.