QANTAS: Record annual profits, big share buyback, new planes and a frequent flyer gift/bribe

Qantas announced a record annual profit today, as expected. At AU$2.47 billion, it’s almost equal to the subsidy we paid them during COVID, of $2.7 billion in taxpayer handouts. Will it pay that back to the Australian Public? Not on your nellie. Instead, it will return to shareholders AU$500 million dollar through a share buyback, starting next month. That’s after it has already conducted an AU$1 billion buyback at an average price of AU6.19 per share.

Alan Joyce is in the hot seat over price, slots and cancellations

In a slightly spiteful move, the Australian Senate has summoned Qantas CEO Alan Joyce to appear before its cost of living enquiry. For previous big corporates, it has been satisfied with lower-rung executives.

Joyce/Qantas are also accused of slot hogging by airport CEOs as a way of limiting newcomers and, thereby, competition.

“Flight delays and cancellations have largely returned to pre-COVID levels and we’ve shifted from heavy losses to a strong profit and pipeline of investment worth billions of dollars.”

Alan Joyce, Qantas Group CEO

Unfortunately, the statistics belie Mr Joyce’s claims despite the record profit. The latest data shows Qantas’ on-time performance continued to be significantly lower than the pre-pandemic rate of 71 per cent. For July 2023, the rate was more than 80 per cent, and flight cancellations are double the rate they were before the pandemic.

Staff and Frequent Flyer Gift/Bribe

One person’s gift is another person’s bribe. Qantas is giving its staff an AU$500 travel credit (will they have as much trouble redeeming that as customers do?). Frequent flyers have also been gifted/bribed up to 75 Status Credits or 5,000 points because they:

…appreciate every time you choose to fly with Qantas. As a gesture of our thanks for making us part of your travel plans over the past year… we would like to offer you a gift of either 5,000 Qantas Points or 75 Status Credits, that can be redeemed via the Qantas App.’

Qantas Loyalty Email to the author

I’m taking the status credits, by the way.

Fleet and Board renewal

Qantas is also splurging on fleet renewal, ordering 12 Boeing 787 Dreamliners and 12 Airbus A350s to replace their ageing fleet of A330s and A380s.

ASX and Challenger board member Heather Smith will join the Qantas board as a non-executive director.

Balance Sheet

Financials are not my strong point, but others have commented that the airline has strong liquidity at AU$10 billion with AU$4.4 billion in cash and additional facilities of AU$5.6 billion in unencumbered assets. The airline’s net debt is below its self-defined target at AU$2.89 billion. It was AU$4.7 billion back in pre-pandemic 2019.

2PAXfly Takeout

Looks like Qantas has done quite well out of the Pandemic with its record annual profit. Alternatively, you can say that from a shareholder’s view, Alan Joyce has done an outstanding job. Your view is probably different as a consumer and passenger. That period has seen a diminution in service levels and customer care, with appalling service through the Qantas various caller centres. Customers have vented their spleen with an overwhelming number of complaints to the Australian Competition and Consumer Commission and on social media, from flight cancellations and delays to fare refunds and credits.

Qantas domestic flights might already be beating pre-COVID levels (international is not), but the damage the airline has done to its reputation in the eyes of its consumers may have long-term consequences that are yet to be reflected in their financial results.

Qantas said domestic flights were already above pre-COVID capacity, but flagged international would not return to pre-pandemic levels until the second half of 2024. The airline received $2.7 billion in taxpayer handouts during the pandemic.