Australia: Qantas pulls fat profit rabbit out its hat

Aggressive fuel hedging, favourable exchange rates, a healthy domestic economy and rigid cost controls have enabled Qantas to buck the global industry malaise and post a massive 44.1 per cent increase in net profit to A$970 million (US$845.1 million) for the fiscal year ended 30 June. CEO Geoff Dixon noted the key drivers of the […]


Aggressive fuel hedging, favourable exchange rates, a healthy domestic economy and rigid cost controls have enabled Qantas to buck the global industry malaise and post a massive 44.1 per cent increase in net profit to A$970 million (US$845.1 million) for the fiscal year ended 30 June.

CEO Geoff Dixon noted the key drivers of the result, which featured a 7.5 per cent year-on-year increase in revenue to A$16.19 billion, included "strong domestic and international demand, leading to a 1.2 per cent yield improvement and a 0.8-point improvement in seat load factor to 80.7 per cent for the group."

Group full-year expenditure rose 5.7 per cent to A$14.8 billion as fuel costs climbed 8 per cent to A$3.6 billion. Hedging benefits were A$554 million higher than the previous year, while foreign exchange rate movements reduced fuel costs by A$431 million.

But, Dixon warned that "at current prices our fuel expense will be over A$1.6 billion higher in 2008/09. We have hedged 81 per cent of our crude oil price exposure at a worst case all-in cost of $118 a barrel. This cover is all in options, which will allow Qantas to benefit if prices fall."

Dixon also said the carrier will inevitably merge with another major airline as part of the global restructuring taking place in aviation industry.

"Other airlines are starting to merge and we must be part of that," Dixon told Australia’s ABC radio.

"We still are not big enough to do it on our own. I believe it will be sooner rather than later," he said, adding he was not looking at any rival in particular.

"All I am saying is that many airlines are now merging in situations where they probably would not have considered it three or four or even five years ago," he added.