It’s raining cash at Qantas in supercharged post-Covid era

BLOOMBERG

Alan Joyce is bowing out at Qantas Airways Ltd with an unprecedented cash splurge, underscoring the profitability of the post-Covid era and reigniting concerns about the soaring cost of air travel. The Australian airline sprayed money in all directions as it reported record earnings. Qantas simultaneously spent billions of dollars on Boeing Co and Airbus SE jets, returned A$500 million ($324 million) to shareholders, and gave A$500 travel credits to its entire rank-and-file workforce.
In a final flurry, Qantas donated more than 1 billion loyalty points to frequent flyers. The gesture was meant, the airline said, as a ‘thank you.’
All this after the peak of the pandemic in 2020 pushed Qantas to the brink of financial collapse. The airline is now delivering supercharged profits thanks to a sharp and prolonged rebound.
Underpinning the earnings is an enduring mismatch between travel demand and available seats.
That has allowed Qantas — and many peers — to price tickets at a level that was unthinkable before the pandemic. Flying Sydney-New York return with Qantas in business class, for example, can cost more than A$20,000.
Even though fares have peaked, there’s little sign that household budget pressures are eating into travel. Joyce, delivering his last set of results before retiring as chief executive officer in November, said demand for flights is still “extremely robust.”
“The future for Qantas has never looked better,” Joyce said on his final earnings call after 15 years at the helm. Shares in the airline rose as much as 3.2% before trading up in Sydney, giving Qantas a market value of A$10.8 billion.
Still, Joyce’s opponents took issue with the bumper profit, some if it earned during a period when Qantas struggled to cope with the passenger rebound and the number of flight cancellations, delays and lost bags soared.
Transport Workers Union National Secretary Michael Kaine described Qantas’ release of 1 million sale fares as “a smoke and mirrors attempt to soften the blow of eye-watering profit, which Australians will see right through following sky-high airfares and rock-bottom standards.”
Adding to the pressure, Joyce has been summoned to testify at a parliamentary cost-of-living inquiry. According to Qantas, the parliamentary committee insisted that Joyce himself appear, even though no other CEO has been obliged to attend.
Qantas’ own balance sheet is far from strained. Net debt — at A$2.9 billion — is not far off half pre-Covid levels. The company has some A$4.4 billion in cash and undrawn debt, and the airline’s key loyalty division is on track to hit its 2024 profit target six months earlier than anticipated.
Qantas is “well positioned,” said Ian Chitterer, a vice president at Moody’s Investors Service. “The credit metrics and factors supporting its credit profile have never looked stronger.”
The latest plane order marked Qantas’ third major aircraft purchase in less than two years. Even after paying for new planes, profits will continue to swell, said Chief Financial Officer Vanessa Hudson, who will succeed Joyce.
“It’s not as good as it gets,” she said. “We are expecting that the future earnings potential of our business is going to continue to grow.”