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Qantas’ paper loss becomes concrete profit

Since the financial crisis Qantas has seen some dark days, including mass union revolt, ugly threats against management and a loss of A$2.8bn in 2013/14. Presiding throughout has been Alan Joyce, the spiky Irishman who can now put two fingers up to his critics after transforming last year’s gargantuan reverse into a A$560m net profit for 2014/15. Every segment of the business – Qantas Domestic, Qantas International, Jetstar, Qantas Freight, and Qantas Loyalty – pushed well into the black, with the three passenger lines delivering roughly A$1.5bn of loss-to-profit turnaround.

Since the financial crisis Qantas has seen some dark days, including mass union revolt, ugly threats against management and a loss of A$2.8bn in 2013/14.

Presiding throughout has been Alan Joyce, the spiky Irishman who can now put two fingers up to his critics after transforming last year’s gargantuan reverse into a A$560m net profit for 2014/15.

Every segment of the business – Qantas Domestic, Qantas International, Jetstar, Qantas Freight, and Qantas Loyalty – pushed well into the black, with the three passenger lines delivering roughly A$1.5bn of loss-to-profit turnaround.

This was largely thanks to the flag carrier’s restructuring plan – encompassing labour renegotiation, outsourcing, offshoring and aircraft retirements – which delivered almost A$900m of benefits for the year.

“If it wasn’t for our transformation programme, Qantas would not be announcing a profit today,” the Qantas CEO confirmed.

Joyce certainly deserves credit, particularly for rescuing Qantas International, which in 12 months metamorphosed from a lead weight into one of the group’s best earners. The long-haul arm’s A$267m profit was its first since 2008 and contrasts with a A$497m loss last year.

Removing A$170m from the group wage bill definitely contributed to this, but results were also massaged by some judicious accounting changes.

These centred on a huge write-down of fleet aircraft values in 2013/14, so big, in fact, that it accounted for almost all of that year’s loss.

But Qantas reaped the benefits this year at its aircraft depreciation expenses fell by more than A$300m.

Cheaper fuel plus the depreciation gain took about A$800m out of the airline group’s costs, and was a prime driver of its recovery.

Operationally, in fact, there was little to distinguish Qantas International’s performance in the recent financial year from last, when the long-haul arm recorded similar revenue and a healthy load factor of near 81 per cent.

Thus Qantas’ recovery was already in full swing last year, even if it was partially disguised by the punishing write-down.

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