If you’re a Qantas shareholder don’t worry about the sub-prime schemozzle that is frightening the markets. Qantas jets will fly overhead dropping the money it doesn’t need.

At least that’s how the $1 billion plus share buyback seemed in the heat of this morning’s record profit announcement of $1.032 billion PBT, $720 million after tax, and another fully franked 15 cents per share making 30 cents for the full year.

The buy back is a give back according to CEO Geoff Dixon and CFO Peter Gregg, involving about 10% of shares.

Gregg said: “We don’t have much debt at floating interest rates … Much of it’s so cheap we weren’t repaying it … but returning it to shareholders.”

So if you are exposed to Bluestone or RAMS, such solid bricks and mortar investments rather than fickle, volatile airline stocks, well, bugger you.

However, the top line for this morning’s encounter with financial reporters came from Dixon when asked what difference it would have made to Qantas if the failed private equity bid had gone ahead.

“I’d be richer”, Dixon said. Dixon remained unrepentant about his support for the bid. “No, we’re not lucky it didn’t go ahead. Of course it would have still been a viable company (if the deal had proceeded.)

“We stress tested this so many times going up to the bid [deadline] that we would have sailed through this situation in the markets. But it didn’t go ahead.”

Buried under the good news about how well Qantas and Jetstar have done in the last year were some clear signals however that the speedbrakes on the wings have definitely been activated.

The split of the company into four entities — fleet, freight, frequent flyer program and airline management — isn’t going to happen overnight, but the loyalty program and the fleet company look like being first, even though they may not now happen until the second half to next June 30.

Dixon also said the cyclicality that has driven so much of his famous past pessimism about Qantas has now been subdued and diluted by expansion in China, India and the CIS that many analysts had overlooked.

Also naked competition between Jetstar and Qantas is now acknowledged, with Dixon speaking frankly for the first time publicly over the creative tensions between Alan Joyce, who runs the former, and John Borghetti, who is the master of lavish premium product initiatives in his role as number three in Qantas management after Dixon and Gregg.

But don’t get carried away if you hate tight seats and bare bones public transport type jets. Jetstar was 8.5% of group profitability, up from 1.8% in 05-06, and will be “around” 10-11% by this time next year.

On the exposure to borrowings side, Qantas dropped two hints.

The first was that it would spend even more than the estimated current new fleet requirements for $25 billion for jets already announced when it shops later in the year for a replacement for those 747s not already being replaced by larger A380s.

And the second was that even after the share buy back, it would have $2.4 billion in cash looking for something to do.

Peter Fray

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