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Qantas completes $2 billion turnaround

Business

Qantas says it has finished its $2 billion turnaround after 5,000 job cuts, major fleet changes and new routes helped it deliver the second highest underlying profit in the airline’s history.

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Australia’s largest carrier also announced a $373 million buyback after a $852 million full-year statutory profit and an underlying profit before tax of $1.4 billion.

Chief executive Alan Joyce said the result marked completion of a turnaround plan that began in 2014 to reposition Qantas as one of the most profitable airlines in the world.

A key part of that turnaround has been the airlines’ reductions in unprofitable routes, in particular services linked to the once booming mining industry, in favour of popular destinations.

“There’s been a complete rejig of the market to balance from resources to other markets that are going well,” Joyce said.

“We balanced the network by taking capacity out of the resource routes.”

He said direct flights linked to mining, like Perth to Karratha, had been axed, making way for in-demand routes like its recently launched Melbourne to Tokyo service.

The group’s international business is focused on the highest growth market in the world, the Asia Pacific, which will be bigger than Europe and North America put together by 2034, Joyce added.

He said that was why Qantas had taken advantage of its partnerships in that region, increasing services and capacity into Hong Kong, Japan and Singapore in recent years.

“Qantas is in a competitive market internationally and domestically, and is performing very well,” he said.

“This year, Qantas made more money than Cathay, Singapore, Air NZ and Virgin and Etihad put together and we still could probably add (a further) 10 airlines to that list.”

The group’s two most profitable businesses, Qantas’ domestic operations and its low-cost carrier Jetstar, reached a record $865 million in underlying earnings before interest and tax.

Qantas International, which has faced intense price and capacity competition, saw an improvement of conditions in the second half.

Net profit for the 12 months to June 30 fell 17.2 per cent, compared to a year ago when results were boosted by the gain on the sale of the Sydney Domestic Terminal.

But the company’s underlying profit before tax of $1.4 billion was in line with its May forecast and beat market expectations.

Qantas expects international capacity to increase in the first half of 2017/2018 by around five per cent, driven by previously announced new routes into growing Asian markets.

The carrier also is investing in lounges, Wi-Fi, cabin upgrades and is looking at new aircraft and new businesses like insurance and financial services to keep delivering sustainable returns.

It said that once the latest buyback is completed, it is expected that the number of Qantas shares will have been reduced by more than 20 per cent since October 2015.

Qantas will also pay bonuses to around 25,000 non-executive employees to mark its turnaround.

Shares in Qantas were up one per cent, or six cents, at $5.86 by 1124 AEST.

– AAP

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