Qantas flags record annual revenue as leisure travel grows

Sydney

AUSTRALIA'S Qantas Airways Ltd posted on Thursday a small rise in third-quarter revenue as more people travelled for leisure, and forecast record annual revenue, sending its shares up as much as 4 per cent.

The country's largest airline said group revenue rose 2.3 per cent to A$4.4 billion (S$4.2 billion) for the quarter ended March 31.

It did not provide forecast numbers for the year but said it was expected to be at "a record level" and added that its international business continued to improve.

"The long-term fleet and network changes we've made are delivering revenue growth, and total market capacity in the fourth quarter is contracting in response to higher fuel prices," chief executive Alan Joyce said in a statement.

He added that the company was facing some weakness in the domestic corporate market, especially in May and June, from the financial services, telecoms and parts of the construction industry.

The Australian domestic aviation market is largely a duopoly of Qantas and smaller rival Virgin Australia Holdings Ltd, both of which have increased fares and boosted domestic earnings by keeping a lid on their capacity.

Qantas is expected by analysts on average to report revenue of A$18.03 billion for the year ending June 30, up 5.6 per cent, according to I/B/E/S data from Refinitiv.

It posted a record revenue last fiscal year as well, when it rose 6.2 per cent to A$17.06 billion.

The company, in its trading update on Thursday, did not disclose its third-quarter underlying profit before tax, its most closely watched measure, or provide the profit outlook for the fiscal year ending June 30.

In February, the airline reported a half-year underlying profit before tax of A$780 million, its lowest since 2015 as a rise in international revenue failed to fully offset a margin squeeze from higher fuel prices.

Qantas shares were up 2.21 per cent at the close on Thursday, after rising as much as 4 per cent earlier.

In the third quarter, Qantas cut domestic capacity by one per cent and international capacity by 1.9 per cent, which helped the airline recover some fuel costs.

The company said that it remained on track to fully offset the impact of significantly higher fuel costs this year, compared with last year.

Revenue per available seat kilometre, a measure that combines fares paid and the percentage of seats filled, grew by 5.5 per cent in the four months from Jan 1, 2019, it said.

Qantas also said it settled the sale of a terminal at Melbourne Airport and secured future access to it for A$355 million, of which it would receive A$276 million in cash in the current financial year and the rest accrued in future periods. REUTERS