Qantas Airways Ltd. upgraded profit expectations for the final six months of 2022 just weeks after its initial forecast, highlighting the intensity of a demand rebound that has sent fares soaring. The airline’s shares jumped.
The Australian airline said Wednesday it expects underlying profit before tax in the period of between A$1.35 billion ($900 million) and A$1.45 billion. That’s A$150 million higher than the range Qantas provided only on Oct. 13.
The improving outlook, after the financial trauma of the pandemic, will allow Qantas to further slash borrowings and increases the chances of more shareholder returns early next year.
The windfall also suggests Chief Executive Officer Alan Joyce’s three-year recovery plan that includes a A$15 billion reduction in expenses is already cascading down to the bottom line. The financial returns shore up Joyce’s position after he weathered a flood of criticism earlier this year when Qantas struggled to cope with the pace of the rebound.
Qantas stock climbed 5.5% to A$6.19 at the open of trading in Sydney, swelling the airline’s market value to A$11.3 billion.
Net debt is now expected to fall to between A$2.3 billion and A$2.5 billion by Dec. 31. That’s about A$900 million better than the airline expected last month.
“Consumers continue to put a high priority on travel ahead of other spending categories,” Qantas said. “Low levels of net debt put the board in a position to consider future shareholder returns in February.”
Qantas announced a A$400 million stock buyback in August.
Demand for flights is so high that even unprecedented fuel costs aren’t enough to arrest the profit surge. Qantas’s fuel bill for the year ending June 2023 will be a record A$5 billion, it said Wednesday.
Revenue is accelerating as flight bookings on Qantas and low-cost division Jetstar stretch into early 2023 and beyond, the airline said.
With demand often exceeding available seats Qantas is managing to pass on its fuel expenses to passengers. The airline’s international capacity is about 30% below pre-Covid levels. Qantas said it’s adding more flights to its schedule in the first half of 2023 as quickly as possible.