Cost-cutting, lower fuel prices boost Qantas turnaround

[SYDNEY] Qantas Airways Ltd said on Monday it expects to post its best first-half profit since 2010 on the back of a faster-than-anticipated rebound following last year's record loss.

The airline said underlying first-half profit would be between A$300 million and A$350 million (S$329-384 million), bolstered by rapid progress in its A$2 billion turnaround programme and lower fuel prices. Shares in the so-called 'Flying Kangaroo' soared 10 percent shortly after the open.

The airline has been struggling in recent years thanks to high fuel costs, a strong Australian dollar, increasing international competition and a domestic price war with rival Virgin Australia Holdings. Its turnaround strategy includes stripping costs, freezing capacity and slashing 5,000 jobs.

"Qantas is 12 months into a three-and-a-half year programme, but these strong early results give us the confidence that we will continue to meet all the targets we have set," Chief executive Alan Joyce said in a statement. "We are committed to completing the full, A$2 billion programme to ensure a sustainable, competitive position for the long term," he added.

Qantas said all of its operating segments would be profitable in the first half. The anticipated result would be an improvement of more than A$550 million compared with the first half last year.

It includes a A$30 million benefit from lower fuel prices and at least A$350 million savings from the ongoing transformation efforts. Most analysts only provide full-year forecasts for the airline. UBS last week raised its full-year forecast to A$610 million due to accelerating momentum in the cost-cutting drive and lower fuel prices. Qantas earnings are usually weighted to the first half of the year, although this year it may make more fuel price gains in the second half. It is scheduled to announce first-half results on Feb 26.

Qantas shares were trading at A$2.30, up 9.5 per cent, at 23.10 GMT.

REUTERS