By Roshan Thomas
(Reuters) – Australia’s Qantas Airways showered investors with its first post-pandemic ordinary dividend, and a special dividend, for the first time in a quarter of a century on Thursday.
The airline reported strong demand across its budget and full-service operations.
The flag carrier’s shares soared as much as 8% to A$9.60, marking their biggest intraday gain since October 13, 2022. The stock was among the biggest gainers in the ASX 200 benchmark, which traded 0.6% higher as at 0047 GMT.
It declared an interim dividend of 16.5 Australian cents per share, the first payout since it paid 13 cents in September 2019. A special dividend of 9.9 cents apiece was also announced for the first time since fiscal 2000.
“Our financial strength means we are now in a position to pay our shareholders dividends for the first time in almost six years,” Qantas CEO Vanessa Hudson said.
“The return of the shareholder dividend was a strong signal to the market that Qantas may have finally turned the page after enduring a troubled post-COVID period,” said Tim Waterer, chief market analyst at KCM Trade.
Qantas has strived to rebuild after the pandemic and fix its reputation after what was one of its most reputationally damaging years in 2023, which included a series of controversies about travel bookings and employee treatment.
The group added 11 new and five used aircraft in the six months to December, and on Thursday announced cabin upgrades for 42 Boeing 737 aircraft to align them with incoming new aircraft cabins.
Qantas expects its first ultra long-haul ‘Project Sunrise’ Airbus A350-1000 jet, designed for non-stop Sydney-London flights, in the second half of 2026.
STRONG DEMAND
Qantas reported an 11% year-on-year growth in underlying profit before tax for the six months that ended December 31, to A$1.39 billion ($875.42 million). This beat Visible Alpha consensus estimates.
Qantas and airlines across Asia-Pacific are still bringing back capacity to pre-pandemic levels. That has pushed fares and yields down, especially on international routes.
Qantas reported a 6.6% fall in international fares across the group, and a 0.8% rise in domestic fares, noting that the rise was below inflation.
Group capacity grew 10%, driven by more seats on Qantas and Jetstar’s international operations. The proportion of seats filled on each plane also rose across the group by 1.9 percentage points, to 85.3%.
Domestically, Qantas said it benefited from the return of business travel.
In a surge of demand for low-cost travel, underlying earnings for the group’s budget offering Jetstar grew more than one-third to A$439 million.
“With a growing fleet of new aircraft, Jetstar went from strength to strength delivering a better experience for customers and an improved financial performance,” Hudson said. “Even in the backdrop of cost of living pressure, we’ve seen really strong demand for Australians to travel.”
For the second half of the fiscal year, Qantas said it anticipated continued strong demand across the portfolio.
The airline forecast growth between 3% and 5% in domestic unit revenue in the second-half of financial year, compared with 5% growth in the first half. It expects international unit revenue to stay flat.
QATAR-VIRGIN AUSTRALIA HEADWINDS
The upbeat results came hours after the federal government approved Qatar Airways’ buying a 25% stake in Virgin Australia , posing a challenge for Qantas, which has long dominated Australian air routes.
IPO-bound Virgin Australia held about 35% of the domestic passenger market by December-end, compared with 64% held by Qantas and Jetstar combined, according to the competition regulator.
Australia’s competition watchdog last week backed the alliance with the Gulf airline, which could result in 28 new weekly return services between Doha and Australia’s major cities.
Qantas has a rival international flying partnership with Dubai-based Emirates. Virgin’s code-sharing agreement with Abu Dhabi-based Etihad will expire on June 1.
Hudson said Qantas welcomes competition
“We feel really confident in being able to compete, not just against Qatar and Virgin but against 52 carriers,” she told investors today.
($1 = 1.5878 Australian dollars)
(Reporting by Roshan Thomas, Sameer Manekar and Rajasik Mukherjee in Bengaluru, Lisa Barrington in Seoul; Editing by Shounak Dasgupta, Alan Barona and Gerry Doyle)
