Qantas profit

[turtlemichael]

CC'ers may be interested in this. Although the market situations are vastly different in Australia from the US, here is one example of a full service carrier able to make a profit competing against government subsidised carriers (in Asia) and low cost discount carriers domestically. I'd suggest that the performance largely comes from good management practices. This annoucement has been made by Qantas today.

 

"Qantas Airways Ltd announced a strong lift in interim net profit that outpaced market expectations.

 

The national carrier said net profit for the six months to December 31, 2004, was $458.4 million, up 28.1 per cent on the previous corresponding period.

 

The result beat market expectations of a profit of $430 million.

 

Qantas declared an interim dividend of 10 cents, up from eight cents.

 

Revenue was $6.43 billion, up 10.8 per cent.

 

Qantas said overall revenue passenger kilometres (RPKs) increased by 8.6 per cent on increased capacity of 13.3 per cent.

 

This had led to a decrease in passenger load factor of 3.2 percentage points.

 

Total international yield, excluding exchange rate effects, improved by 3.6 per cent compared to the corresponding prior period.

 

Total domestic yield deteriorated by 5 per cent.

 

International flying operations, including Australian Airlines, contributed earnings before interest and tax (EBIT) of $229 million, an increase of 14.4 per cent.

 

Domestic flying operations, including QantasLink and Jetstar, contributed EBIT of $390.1 million, an increase of $66.2 million over the corresponding prior period.

 

Qantas said its overall profit before tax was $601.30 million.

 

Chief executive Geoff Dixon said Qantas still believed it would improve on its 2003/04 result in 2004/05 and provide an outcome in line with market consensus.

 

Qantas chairman Margaret Jackson said Qantas continued to benefit from an emphasis on growing its core flying while seeking efficiencies in its business segments.

 

Ms Jackson said the increased dividend was a change from Qantas' existing dividend policy.

 

It reflected the confidence of the board and management in the company's ability to internally fund future growth and investment while reducing gearing, she said.

 

"This will be achieved by growing future cashflow so that it exceeds capital expenditure," she said.

 

"We do not believe this will be easy, but we must have the discipline to reward our shareholders by paying franked dividends while investing for growth."

 

Mr Dixon said the main drivers of the interim net profit result included a strong performance from the domestic flying business, improved yields in the international business market and a reduction in the impact of historically high fuel prices through a hedging program and a fuel surcharge.

 

Mr Dixon said the result in the domestic flying business highlighted the success of the Qantas' strategy to coordinate network and capacity.

 

"The launch of Jetstar in May 2004 was the central plank in this domestic strategy and its EBIT of $19 million was ahead of our expectations," he said,

 

"Jetstar will continue to grow in domestic leisure markets and will look for further opportunities as it moves towards a single fleet of new A320 aircraft."

 

Mr Dixon said the international market remained extremely competitive with substantial capacity increases being accompanied by heavy discounting.

 

He said Qantas' costs must be further improved if the airline was to compete successfully against the "myriad" carriers that are either subsidised or owned by their national governments.

 

Mr Dixon said also that Qantas supported the further liberalisation of aviation markets "where this resulted in balanced outcomes and genuine opportunities to compete".

 

"We need liberalisation for our own growth and accept that this involves a mix of opportunities and challenges," he said.

 

"However, the bilateral system of international air services arrangements is complex and there will not be effective reciprocity to compete in third markets unless liberalisation is sequenced carefully.

 

"This lies at the heart of our concern that Singapore Airlines should not be granted access to the trans-Pacific route at this time."

 

Qantas shares closed at $3.64 on Wednesday"

[Globaliser]

I'd suggest that the performance largely comes from good management practices.

And to a very large extent, good market discipline and product placement, eg:-

• Upgrades only if you pay for them with money, or with frequent flyer points or credits - otherwise the premium product is protected against freeloaders until it's operationally necessary.
• Hospitality - ie inclusive food and drink on mainline, including alcohol at appropriate times. And at recently upgraded standards, not reduced ones.
• No flexibility on the cheap fares on the day of travel, to stop business travellers using cheap fares when they should be buying expensive ones to get their flexibility.
• Effective market segmentation using JetStar, rather than trying to provide a low-fare product using high-cost assets.

Why don't the N- registered airlines get it?