Feb 26 (Reuters) – Australia’s Qantas Airways on Thursday reported record first-half underlying earnings bolstered by resilient travel demand, but its shares fell more than 6% after the market was disappointed by the results in its international segment.
The airline posted underlying profit before tax of A$1.46 billion ($1.04 billion) for the six months to December 31, beating the Visible Alpha consensus estimate of A$1.42 billion and the A$1.39 billion earned in the same period a year earlier.
Qantas CEO Vanessa Hudson said the results reflected benefits from the carrier’s investment in upgrading its fleet with more fuel-efficient planes and strong performances from budget arm Jetstar and its expanding loyalty business.
“We’re already seeing the benefits from the next generation aircraft that are flying,” Hudson said, noting that around 60% of Jetstar’s profitability increase came from new aircraft through growth and network opportunities.
“This gives us confidence in the benefits that will flow once Qantas’ new aircraft reach scale,” she added.
The group’s domestic division delivered a 14% rise in underlying earnings before interest and tax (EBIT) to A$1.05 billion, supported by strong business and leisure travel demand.
But its international operations faced headwinds, with underlying EBIT down 6% to A$463 million, primarily due to higher costs, wages and staff training for new planes.
Citi and RBC Capital Markets analysts said the international results missed expectations.
Hudson noted a softer-than-expected performance in economy-class travel on its Australia-U.S. routes during the first half, primarily due to foreign exchange impacts rather than border policy concerns as the Australian dollar recently hovered in the low-60 U.S. cents range.
“The U.S. market is a really important market for us,” she told reporters. “The Australian dollar does affect purchase decisions when it comes to travel.”
However, Jetstar’s international business, which focuses on flights to leisure destinations like Indonesia’s Bali, performed strongly, with its Australian international earnings up 9%.
The group closed Singapore-based Jetstar Asia last July and announced earlier this month plans to sell its stake in Jetstar Japan as it moves to focus on core domestic operations.
The carrier received nine new aircraft during the half and expects 30 more over the next 18 months, with net capital spending totalling A$1.8 billion as fleet renewal accelerated.
Looking ahead, Qantas expects strong travel demand to continue, with domestic unit revenue forecast to increase 3% in the second half, in line with the prior six months, and fuel costs of A$2.5 billion, slightly lower sequentially.
($1 = 1.4047 Australian dollars)
(Reporting by Sameer Manekar and Nikita Maria Jino in Bengaluru and Julie Zhu in Hong Kong and Byron Kaye in Sydney; Editing by Shinjini Ganguli, Tasim Zahid and Jamie Freed)
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