Qantas FY24 Earnings Call Highlights

Qantas' (ASX: QAN) FY24 results were largely in-line with market expectations, demonstrating a stable performance amid significant investment in service improvements, fleet renewal and customer experience.

FY24 Earnings Summary

• Underlying profit before tax down 16% to $2.08bn

• Statutory profit after tax down 28% to $1.25bn

• Net debt of $4.1bn, within target range

• Operating margin down 310 bps to 10.4%

• Announces on-market buyback for up to $400m

• Business outlook – Group is seeing stable demand across the portfolio with positive revenue momentum heading into the first half of FY25

  • Group domestic RASK expected to increase 2-4% in 1H25 vs. 1H24

  • Group international RASK expected to fall 7-10% in 1H25 vs. 1H24

  • Note: RASK stands for Revenue per Available Seat Kilometer, which measures profitability and efficiency of the airline's operations

Earnings Call Highlights

The below topics have been answered by CEO Vanessa Hudson, CFO Robert Marcolina, CEO of International and Freight Cam Wallace, CEO of Jetsar Stephanie Tully and CEO of Loyalty Andrew Glance.

Booking trends: "Our forward bookings and travel demand remain stable, and intention to travel and the revenue intakes that we are seeing are positive across all of our flying brands."

Premium cabin performance: "Premium leisure demand moderated, but this was as expected. Pleasingly, it was offset by ongoing growth in corporate and SME travel."

Ultra long-haul routes: We continue to see strong performance across all our ultra long-haul routes. Routes like Perth-London continued to demonstrate strong revenue premiums being sustained and RASK increasing 5% versus the prior year despite the overall reduction in RASK across the rest of the market."

Capacity numbers and trends: "Capacity for Qantas International grew 30%, with ASKs for the year at approximately 85% of pre-COVID levels."

Jetstar performance: "This was a record result for Jetstar, with underlying EBIT of $497 million for the year. This was up 23%, with demand for low-fare travel remaining strong."

Cost performance: "Costs fell 5.8%, supported by the unwind of temporary costs and scale benefits from returning fleet, offset by customer investments and the impact of freight performance."

Loyalty program performance: "Qantas Loyalty delivered an underlying EBIT of $511 million, in line with guidance. Total points earned in FY24 were 202 billion, and 171 billion redeemed, both growing at double-digit rates."

New aircraft: "We are on track to receive over 40 new aircraft in the next two years, one every three weeks. This new fleet technology improves cash generation, profitability, and the experience for our customers and employees."

Airfare price trends: The moderating fare environment we've seen across Domestic and International impacted our results."

Capital management and dividend: "Today, we're also announcing a further $400 million on-market share buyback, in addition to completing the remaining $31 million for FY24. We anticipate having a franking credit balance sufficient to reinstate a fully franked base dividend in the second half, subject to board approval."

Analyst Q&A Highlights

On confidence in improving second half RASK outlook:

• "If I look at some examples, we've got Air Canada pulling out of Melbourne-Vancouver. We've got Etihad not flying from Brisbane to Abu Dhabi. Turkish Airlines haven't loaded their capacity from Sydney to Istanbul. Virgin have pulled out of Cairns-Haneda and United Airlines have pulled out of Brisbane-LA. So we're seeing a moderation of capacity and we've also been seeing more seasonality."

• "If you look at Jetstar, if you look at our travel intention, it's incredibly strong. Stronger than it's been at the low fares end and also our intakes. The last six weeks have been very strong internationally. Last week, we had our best week ever at Jetstar."

Cost drivers for FY25: "In terms of the cost environment, as we're obviously seeing and we have seen in FY24, there are a number of categories that continue to grow greater than inflation, such as food and beverage, in-flight services, those type of things."

Qantas Loyalty drivers, is it due to Classic Plus or other factors: "Most certainly, Classic Plus has been a major improvement with regards to active members across the course of the financial year ... I'd like to think of it more in terms of the holistic value and probably more importantly, the integrated value across the entire group."

How will Qantas meet margin targets:

• "One of the shortfalls in the domestic margin target is still the recovery of the corporate market, which is growing and which we are seeing recover, but it is more slow than what we would have thought."

• "The domestic market remains rational, and we believe that ... That should enable all airlines, at a minimum, to get a RASK increase year-on-year in line with CPI."

• "The transformation benefit is going to come with the new investment that we are making in the new fleet."

• "We also know that with the transformation in the fleet, with the benefits flowing for Qantas Freight, we see upside in profitability from Qantas Freight."

Dividend guidance: "In terms of the dividend, you're right. On that particular slide, we have flagged that it is our intention to reinstate a base dividend. We're not providing that information today ... But as we go into the second half, obviously with board approval, we will be looking to size and to communicate what that base dividend is."

Consumer trends: "Yes, you're seeing some down-trade and that definitely where Jetstar is benefiting from, but also we have seen some shift into international as international fares come down."

This article was generated with the support of AI and reviewed by an editor.