By Praveen Menon, Roushni Nair and Archishma Iyer
SYDNEY (Reuters) -Australia's flagship Qantas Airways Ltd and its cross-Tasman rival Air New Zealand posted huge profits on Thursday, boosted by the return of robust travel demand in the post-pandemic era.
Air travel has boomed since the removal of pandemic restrictions and border closures in both countries last year. That, combined with a shortage of aircraft, parts and labour, has contributed to higher airfares, which peaked in the December quarter.
European airlines like Germany's Deutsche Lufthansa (ETR:LHAG) and Air France-KLM have also given upbeat forecasts for demand.
Qantas, known as the Flying Kangaroo, reported an annual underlying profit before tax of A$2.47 billion ($1.60 billion) for the fiscal year ended June 30, swinging from a loss of A$1.86 billion a year ago and its first full year statutory profit since 2019.
It also announced an order for 24 new wide-body aircraft - the final piece of the company's jet fleet renewal programme.
"This is a remarkable turnaround, three years in the making, and it has been hard," Qantas Group CEO Alan Joyce said at a news conference.
"From being 11 weeks shy of insolvency to a challenging return to flying across the industry, to finally getting back to the leading domestic operational performance," he said.
Qantas said its domestic capacity is expected to remain above pre-COVID levels throughout fiscal 2024.
The profit was helped by the completion of the group's A$1 billion recovery programme launched in 2020, in the wake of the COVID-19 pandemic.
Air New Zealand on Thursday also signalled brisk customer demand for financial year 2024, after posting a large annual profit, helped by a rebound in travel.
"Having restored its international network, the airline carried out the biggest recruitment drive in its history and returned all aircraft to the skies," Air New Zealand said in a statement.
STRONG DEMAND
Qantas' results beat the mid-point of its profit outlook of A$2.43 billion to A$2.48 billion, nearly A$850 million higher than its 2018 record levels of A$1.60 billion.
Analysts were expecting a profit of A$2.45 billion, according to Refinitiv Eikon.
Qantas also announced a share buyback programme of A$500 million. The company, however, did not announce a final dividend, continuing the trend of non-payment for the past three years.
Qantas CEO Joyce, speaking at a news conference, said travel demand is extremely robust at the moment.
Despite cost of living pressures, surveys have found that people are planning to spend more on travel over the next six months and less on homeware, renovations and even alcohol, he said.
"With strong performance across the business, a robust outlook, net leverage of just 0.6x and total sources of liquidity of around $10 billion, the credit metrics and factors supporting its credit profile have never looked stronger," said Ian Chitterer, vice president, Moody’s Investors Service.
It's the final results announcement for Joyce who makes way for new CEO Vanessa Hudson (NYSE:HUD) in November, the first woman to lead the century-old airline.
Joyce, whose 15 years in the job has made him one of the longest-serving CEOs of a major Australian company, has been criticised for the reputational crisis faced by airline during the pandemic, as passengers were frustrated with delays, cancellations, lost baggage and staffing issues.
"It's bit of bittersweet moment," Joyce told reporters.
"The future of Qantas has never looked better and that is one thing I am very proud of," he said.
($1 = 1.5437 Australian dollars)