A strong performance in Qantas' international unit has helped the carrier post a near 2% lift in its total group revenue to a record A$4.56 billion ($3.12 billion) for the fiscal first quarter.
Total group capacity saw a marginal 0.2% decline, driven by a 0.6% cut in group international capacity and a 0.5% increase in group domestic capacity.
The carrier says international unit revenue rose by 4.4%, led by a reduction in competitor capacity, as well as network and fleet changes by Qantas International. While its own capacity was down 2.5%, unit revenue was up by over 6%.
It also expects a A$25 million impact to the group company's first half results from the protests in Hong Kong, with an ongoing capacity reduction to minimise the effect to its second half.
"Qantas International has seen significant upside from competitor capacity contracting more than anticipated, which is expected to continue for at least the remainder of the first half," says Qantas group chief executive Alan Joyce.
Domestically, unit revenue fell by 0.9% due to mixed market conditions. Qantas notes that traffic from the resources industry "continued to strengthen," offsetting weaker demand from other corporate sectors.
At low-cost unit Jetstar, international revenue was up, thanks to strong demand on leisure routes to Asia, which helped to offset weaknesses caused by the strength of the US dollar. Capacity rose with increased short-haul flying to Bali, and the return of aircraft from heavy maintenance.
However, its domestic unit revenue fell by 2.6% due to weakened demand in the price-sensitive leisure market. Higher load factors aided in Jetstar's ancillary revenue growth.
As a result of continued deterioration in global trade conditions, Qantas expects the freight unit to see an impact of A$25 million to A$30 million to its profit for the full year.
Qantas has fully hedged its fuel requirements for fiscal year 2020, and now expects total fuel costs to come in at A$3.98 billion — a A$29 million increase from last year.
Capacity across the group is expected to grow by up to 1% for the half-year ending on 31 December, with increases in the domestic and international sectors.
It adds that it is on track to deliver "at least" A$400 million in transformation benefits over the full fiscal year, with an increased focus on cost cutting initiatives during the second half. No profit guidance was given for the first half nor the full year.