Qantas this morning shot down rumours of a takeover bid that it may well have inadvertently started, while posting strong full-year profits that undermined its recent warnings about how a fading Qantas international business was putting the future of the group in peril.
The headline figures are that Qantas made an underlying profit before tax of $552 million in the year to June 30 compared to $377 on the same basis in previous financial year.
It gave a partial breakdown of segment performance, Qantas international, domestic and regional contributed $228 of the above (previously $67 million), Jetstar domestic and international delivered $169 million (up from $131 million) and the Frequent Flyer program made $342 million on that basis (compared to $328 million in FY 2010).
In statutory net profit terms, the group made $249 million net profit, more than twice the $116 million reported last year, but well short of the $1 billion-plus that CEO Alan Joyce said the group needed to make each year to remain sustainable.
The airline put the costs of natural disasters, Chilean ash clouds, the Japan tsunami, and floods and cyclones in Queensland at $224 million, and while refusing to separate the performance of its full-service brands into domestic and international components, reasserted its claim that the long-haul Qantas operations lost more than $200 million, leaving analysts and, no doubt, Virgin Australia pondering calculations that would show Qantas domestic is minting gold bars, or wondering what is missing from the picture in which the Qantas brands combined made an underlying PBT contribution of $228 million.
Qantas recovered from Rolls-Royce the $95 million impact on its results caused by the disintegration of one of the engines on an A380 near Singapore last November, leading to the prolonged grounding of the fleet of giant Airbus flagships.
This was possibly the first corporate results press conference in Australia in which a CEO invoked Elvis Presley and UFOs at Roswell. Joyce derided pilot union claims that the airline is bleeding Qantas international operations to subsidise Jetstar’s expansion by calling this a conspiracy theory in the class of no moon landings having taken place, Elvis Presley working in a fast-food outlet at Manly and UFOs being kept secret in the American desert.
However the pilot union last night released the preliminary stage of a forensic investigation of the Qantas accounts and operations by PPB Advisory, which clinically set out several areas that merit close examination.
Joyce affirmed that Qantas had not received a formal or informal approach from any private equiteers, a rumour that had been gaining currency in recent weeks as the share price dropped deep into dangerous depths. However, he wouldn’t be drawn on whether his concerns about the risk of a raid were what yesterday inspired the Gillard government to tell The Australian that it would oppose such a bid in the national interest.
He also hosed down expectations of an immediate announcement of the base in which Qantas will set up a new Asian premium carrier, providing new connections to Australia as well as contesting the intra-Asia Pacific market in its own right.
Joyce said there were partners and governments to consult before an announcement could be made, even though last week he appeared to confirm that it would be based in Singapore in an interview with Leigh Sales on 7.30.
The Asia airline concept has the industry transfixed, as it will, according to Qantas, feature flat, bed seats in first class in A320 jets, which cannot reach Sydney or Melbourne non-stop from Singapore or Kuala Lumpur or from anywhere in China.
Joyce didn’t address concerns about the impact of the Qantas long-haul restructuring announced last week on its business, through the cutting back of Qantas flights to London, and the intended passing of passengers over to British Airways and other carriers at a time when its network and fleet no longer allow many Australians to fly to European cities all the way on a Qantas jet, unlike the services provided by Emirates, Singapore Airlines and Cathay Pacific.
But he did say that “the good old days have gone but … what has not gone is our commitment to keeping Qantas a great Australian airline and the Australian spirit it embodies”.
And, that “the best way to honour the Qantas of the past is to make sure it has a future”.
Joyce offered no guidance for future earnings, and continued the dividend drought for Qantas shareholders into its third year.
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