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Qantas upbeat despite full-year profit drop

Qantas will focus on matching capacity to mixed demand conditions across its major markets after revealing a 17% fall in full-year underlying profit before tax to A$1.3 billion ($881 million).

Total revenue for the group for the year ended 30 June rose 4.9% to A$18 billion, as unit revenue grew 5.3%.

That was offset however by a 7.1% rise in expenses to A$16.5 billion. The airline noted that fuel costs rose by A$614 million due to higher oil prices, and there was a A$154 million impact from the fall in the Australian dollar.

The airline's statutory net profit fell 9.7% to A$891 million, partially driven by the airline returning to paying income tax.

"It's a very strong result particularly when you consider some of the headwinds that we faced," comments chief executive Alan Joyce.

Qantas's domestic unit delivered underlying earnings before interest and tax (EBIT) of A$740 million, down 3.3% on the result for the last year as capacity fell 1.5%, meeting a slight reduction in demand.

Joyce notes that the domestic market has been mixed, with demand in the key corporate market moderating after a strong start to the year.

"That's become now pretty flat, there's not much growth in the corporate market. We're seeing huge growth in the resources sector, particularly in Western Australia."

Qantas International delivered a 28% fall in EBIT to A$285 million, as higher fuel costs in the first half were offset by rising fares during the second half when competition lessened.

"For the first time since I have been CEO we are seeing negative capacity growth into Australia," says Joyce.

He also pointed to strong performances from its Perth-London services, its return to using Singapore as a hub, and the continued introduction of Boeing 787-9s to its network as major positives for the business.

Jetstar group carriers reported a 19% fall in underlying EBIT, which was largely blamed on negative foreign exchange movements and significant increases in airport charges in Singapore that largely affected its Jetstar Asia operation.

Cash and cash equivalents across the group at 30 June amounted to A$2.16 billion, up from A$1.69 billion at the start of the year. Net cash from operations was A$2.8 billion.

Gross capital expenditure over the 2020 fiscal year is expected to come to A$2 billion, including payments for six new 787s, cabin reconfigurations on its 12 A380s and investments in new technology.

In its outlook, Qantas says that it will focus on matching capacity with demand, which will see domestic group capacity to be flat or slightly down during the first half, while international capacity will grow by around 1.5%.

Joyce says that this reflects the varied demand conditions, but was upbeat about the airline's ability to manage its way through that.

"It's a mixed bag, but with the optimism around our ability to manage capacity, I think we can manage those variations quite effectively."

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