Qantas roars back into black after aggressive cost-cutting

Australian carrier Qantas on Thursday roared back into the black after an aggressive shake-up to stem mounting losses, posting its best interim result in four years helped by a revival in its international arm.
The Aus$203 million (US$162 million) result in the six months to December 31 marked a stunning turnaround from a net loss of Aus$235 million in the same period in 2013 and smashed analyst forecasts.
Underlying profit before tax -- the airline's preferred measure of financial performance -- was Aus$367 million, compared to a loss of Aus$252 million previously which was driven by record fuel costs and fierce competition.
The reversal in fortunes -- after a record annual loss of Aus$2.84 billion in the last financial year -- comes on the heels of a ruthless cost-cutting drive that has seen thousands of jobs axed, aircraft deliveries deferred and growth at Asian offshoot Jetstar frozen.
Chief executive Alan Joyce said the result showed the group was executing the right plan.
"The decisive factor in our best half-year result for four years was our complete focus on the Qantas transformation programme," he said.
"It's clear that without the impact of transformation, we would not be announcing a profit today. What sets this transformation apart is that we are reducing costs permanently while at the same time delivering Qantas' best ever fleet, product and service.
"We are meeting or exceeding all our targets as we build a sustainable future for Qantas with an emphasis on growing long-term shareholder value."
The result was driven by strong performances across all of the airline's divisions, with both domestic and international operations in profit.
Domestic earnings improved to Aus$227 million from Aus$170 million previously while the struggling international arm moved into the black for the first time since the global financial crisis, turning a Aus$321 million loss into a Aus$53 profit.
- Solid foundation -
The carrier also enjoyed reduced depreciation due to a fleet restructure, a 2.1 percent boost in revenue to Aus$8.07 billion and savings from lower fuel prices.
Its low-cost Jetstar offshoot performed well, turning a loss into a profit with the brand growing in Asia and now flying to 66 destinations across 16 countries in the region.
"Qantas has smashed analysts' forecasts, delivering a $203 million profit that will ease investor concerns and goes someway to justifying the more than doubling of its share price over the last four months," said CMC Markets' chief strategist Michael McCarthy.
"Cost cutting and operational improvements contributed, but a lower oil price is a key factor in the turnaround."
Qantas shares soared six percent when the market opened, before falling back to be 3.9 percent higher at Aus$2.92 in early trade.
The turnaround appears to vindicate Joyce's strategy to slash Aus$2.0 billion in costs and axe 5,000 jobs to help counter a price war with subsidised domestic rival Virgin Australia.
The chief executive said the airline's financial position was significantly stronger because of this aggressive cost-cutting and it had given Qantas "a solid foundation for growth in earnings".
"All parts of the Qantas business have now contributed to this good result," he said.
"It is about making ourselves strong and resilient through the ups and downs of the economic cycle. Over the next two years, we will further strengthen the Qantas position.
"We expect now that all operating segments will be profitable in the full year," he added.