Qantas upgrades profit guidance as cabin crew union votes to strike

Australian flag carrier upgraded its profit guidance for the first half of FY23, but could face a tough Christmas after the airline’s cabin crew union voted to strike. Qantas said it “was a very disappointing” step by the union and told media outlets in Australia that shift length changes the airline wants to impose “the same that apply to crew working at other domestic airlines in Australia”. Qantas domestic flight attendants have demanded the airline lift a two-year staff wage freeze or face the threat of Christmas industrial action, saying the airline can afford to pay higher wages, according to Australian media reports. More than 1,000 flight attendants have voted in favour of work stoppages of up to 24 hours as the next step in a standoff with management over pay and conditions. Qantas however, said “continued strength in travel demand has resulted in the Qantas Group upgrading its profit expectations for the first half of FY23. The Group now expects an Underlying Profit Before Tax of between $1.35 billion and $1.45 billion. This represents a $150 million increase to the profit range given in early October 2022,” the airline said. Consumers continue to put a high priority on travel ahead of other spending categories and there are signs that limits on international capacity are driving more domestic leisure demand, benefiting Australian tourism, although any industrial action could dampen domestic travel. Fuel costs remain significantly elevated compared with FY19 and are expected to reach approximately $5 billion for FY23, which would be a record high for the Group despite international capacity at around 30 percent below pre-COVID levels, the airline said. Operational performance has continued to improve, with Qantas ranking as the most on-time domestic airline in October. The $200 million investment in rostering additional staff, continued recruitment and reserve aircraft will help maintain these levels during the latest wave of COVID infections in the community and into the busy Christmas period, as well as limiting the impact of extreme weather (especially wind) in November. The Group’s net debt is now expected to fall to an estimated $2.3 billion and $2.5 billion by 31 December 2022. This is around $900 million better than expected in the most recent update, due largely to the acceleration of revenue inflows as customers book flights on Qantas, Jetstar and partner airlines into the second half and beyond, as well as deferral of approximately $200 million of capital expenditure to the second half. Around 60 percent of the $2 billion in COVID-related travel credits held by the Group have now been redeemed by customers. Total credit usage is consistent at a rate of circa $70 million a month and new initiatives will be announced shortly to encourage full use of remaining credits over the next year. While capacity is constrained, over a million sale fares were launched in October and further sale activity is planned in the weeks ahead. More than five million reward seats are available for frequent flyers over the next year and more Points Planes will be released soon. The Group is adding capacity as quickly as possible in the second half of the year while maintaining operational reliability. Of the $400 million share buyback announced in August 2022, 76 percent is now complete at an average price of $5.66. Low levels of net debt put the Board in a position to consider future shareholder returns in February 2023 consistent with the Group’s financial framework and phasing of capital expenditure for fleet renewal. The Group recently finalised a three-year agreement with Jetstar pilots as part of its improved pay policy and expects to reach in-principle agreements with others in coming weeks. More than 6,500 employees, or 33 percent of those covered by an enterprise agreement, have now signed up to a post-COVID EBA. The Group remains on-track to share the benefits of the recovery with around 20,000 non-executive employees through a $5,000 boost payment and up to 1,000 Qantas shares (currently worth approximately $6,000), subject to key conditions being met. For Editorial Inquiries Contact: Editor Matt Driskill at [email protected] For Advertising Inquiries Contact: Head of Sales Kay Rolland at [email protected]