Qantas upgrades profit forecast by $150 million off the back of booming travel

Qantas has lifted its profit forecast for the December half by $150 million, saying limited capacity for international travel is seeing more Australians holiday at home.

Strong consumer demand propelled the airline’s COVID-19 recovery despite capacity restraints and high fuel costs, with the company announcing an upgrade of between $1.35 billion and $1.45 billion in underlying profit before tax in the first half of its financial year, up $150 million from its previous guidance given in October.

In a statement to the Australian Stock Exchange (ASX) on Wednesday, the company said net debt was expected to fall between $2.3 billion and $2.5 billion by December 31, about $900 million more than previously predicted.

Qantas says consumers are still putting 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.

Travel plans disrupted by the pandemic have left hundreds of thousands of Australians with billions of dollars of flight credits, but there have been issues around flight credit schemes, including incomprehensible terms and conditions and inability to transfer to family members. 

The airline said that around 60 per cent of the $2 billion in COVID-related travel credits had now been redeemed by customers.

Total credit usage had reached about $70 million per month, it said, and the airline committed to announcing new initiatives so the remaining credits could be used by the end of this financial year.

It said fuel costs remained significantly elevated compared with FY19 and were expected to reach about $5 billion, which would be a record high for Qantas Group, despite international capacity at around 30 per cent below pre-COVID levels.

Of the $400 million share buyback announced in August, 76 per cent has been completed at an average price of $5.66.

The airline flagged that low levels of net debt put the board in a position to consider future shareholder returns in February next year, consistent with Qantas Group’s financial framework and phasing of capital expenditure for fleet renewal.

More to come.