(Bloomberg)—Qantas Airways Ltd. expects to completely recover higher fuel costs this fiscal year due to strong demand for air travel, even after rising oil prices dented first-half profit.

  • The airline’s first-half underlying profit before tax fell 19 percent to A$780 million ($559 million) from a year earlier but Qantas announced more returns to shareholders with a A$305 million stock buyback

Key Insights

  • Qantas’s expectation that it will recover higher fuel costs for the full year reflects the airline’s dominance in its home market, as well as a moderation in the oil price toward the end of 2018
  • That moderation is reflected in the airline’s forecast for its fuel bill this year to be A$3.90 billion—less than the A$4.09 billion it previously anticipated
  • Qantas is keeping capacity growth flat across its domestic and international routes in the second half. That’s helping it manage the fuel bill by minimizing empty seats.

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  • “Looking ahead, we’re seeing strong forward bookings,” CEO Alan Joyce said in a statement. “Competitor capacity growth has slowed internationally and is relatively flat domestically. And oil prices have declined from the peaks we saw late last year.”
  • “These factors point to a strong second half and we expect to completely recover our increased fuel costs by the end of this financial year,” Joyce said.
  • See Qantas filings here
  • Click here more details on the earnings