Qantas kept its dividends grounded today while profits soared fourfold in the six months to December 31, 2010 to  a net $241 million.

The Qantas group’s CEO Alan Joyce also deflected questions about relations with Qantas pilots and sounded almost conciliatory about the negotiations yesterday and that are continuing today with the Australian and International Pilots Association over the next enterprise bargaining agreement.

“We are seeking a moderation of their position,” Joyce said.

However, he also revealed a new program of fleet expansions, mainly in single-aisle Boeing 737s and Airbus A320s that would see Qantas domestic capacity grow by 4% this year while Jetstar grows by 20%, figures unlikely to ease tensions between management and the Qantas pilots, who say they are being purged from the group by the company’s use of Jetstar to replace their training programs, and terms and conditions.

The other headline figures and factors in the half yearly results are:

  • Underlying PBT of $417 million, up 56% on the corresponding period.
  • Revenue up 10% to $7.6 billion.
  • Operating cash flow of $743 million, up 54%.
  • Cash balance of $3.3 billion.
  • Statutory net profit after tax of $241 million, compared to a previous $58 million

The CFO Gareth Evans made several interesting disclosures in the Q&A. He said that although Qantas was not declaring a dividend as a matter of prudence it was considering reducing its cash balance.

Qantas shareholders last received a dividend for the half year to December 31, 2008.

Evans  revealed that the routes to London and Los Angeles had lost money in the six months to December 31, but both would have been profitable had the unfavourable impact of the A380 groundings not diminished the underlying PBT of Qantas (domestic plus international) by $55 million.

The A380 fleet grounding would continue to affect the current second half of the financial year by an estimated additional $25 million on a underlying PBT basis.

However, Qantas was insured for the full cost of repairing the A380 damaged by a catastrophic engine disintegration last November 4 near Singapore, and while negotiating compensation with Rolls-Royce, continued to hold legal action against the engine maker in reserve.

The group estimated the impact on underlying PBT from the natural disasters in Queensland at $70 million in the current second half but its profit guidance was for a significant improvement in its performance for the full year subject to fuel prices or unexpected disrupting factors, similar in impact to recent northern hemisphere snow storms or ash clouds from volcanic eruptions.

Qantas also announced a rapid fivefold increase in the size of WA based Network Aviation with 10 Fokker F100 jets,  following its recent purchase of the business to give it more access to the lucrative fly-in-fly-out charters used by the mining industry.

Joyce said Qantas and Jetstar had reclaimed their No.1 and No.2 places as the most profitable domestic carriers in Australia, an interesting recognition of the fact that Virgin Blue made more money from actual flying (excluding frequent flyer program earnings) than it did in the previous financial year, and before its former executive general manager, John Borghetti, succeeded Brett Godfrey as Virgin Blue CEO.

Peter Fray

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