Qantas expects a record $1.3bn in first-half profit: shares surge to 5-month highs

Qantas (ASX: QAN) said it expects to see profit before tax between $1.2bn to $1.3bn for the first-half of FY23 thanks to the sustained acceleration of travel demand.

“It’s been a really challenging time for the national carrier but today’s announcement shows how far we’ve " said CEO Alan Joyce.

“Since August, we’ve seen a big improvement in our operational performance and an acceleration in our financial performance."

The $1.2bn to $1.3bn figure will be one of Qantas' largest first-half profit before tax figures on record. But this follows five consecutive halves of heavy losses due to the pandemic and ongoing lockdowns, resulting in a cumulative loss of $7bn.

Qantas shares rallied 11% to a 5-month high as the market opened.

An accelerated financial recovery

Domestic

Qantas will operate at 94% of pre-pandemic domestic capacity in the first-half of FY23 and expects this to grow to around 100% in the second half - a six percentage point cut compared to its previous capacity guidance.

"This reduction is designed to protect the sustained improvement in operational performance as the broader industry recovers," Qantas said in a statement.

From a revenue perspective, intakes for business purposes were over 100% of pre-pandemic levels and leisure intakes have strengthened to over 130%.

International

International capacity is forecast to rise from 61% in the first-half to 77% in the second-half. The uplift is largely dependent on how many A380s are returned from storage and required maintenance.

"Yields from international markets are particularly strong but are expected to moderate as Qantas and other carriers steadily increase capacity," notes Qantas.

Loyalty

Qantas Loyalty is projected to deliver record earnings in the first half and on track to reach its FY23 earnings target of $425m to $450m. This represents a 56% to 65% increase compared to FY22.

Addressing reliability, fuel and inflation

Qantas has been hit by several operational downgrades amid higher-than-expected staff absenteeism, bad weather and supply chain-related issues.

Joyce reassures investors that "Qantas’ operations are largely back to the standards people expect, and Jetstar’s performance has improved significantly in the past few weeks."

The operating environment remains 'complex' as a result of high fuel prices, inflation and near record low levels of consumer confidence.

Still, Qantas said "robust demand indicates that people are prioritising spending on travel above other categories", which "supports the Group’s ability to fully recover higher fuel costs through fares."

Qantas share price chart