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High-flying Qantas predicts record profit for FY23

Qantas (ASX:QAN) is forecasting a record underlying pre-tax profit of up to $2.48 billion in the 2023 financial year and has boosted its buyback by $100 million.

It is more than $1 billion above the 1.43 billion figure for the December 2022 half year.

The new estimate for the year to June 30 is almost $1 billion higher than its next best result in 2018.

In a quarterly update on Tuesday, Qantas claimed the improvement came from moderating fuel and other costs and that the underlying profit would come in around a range of $2.425 billion to $2.475 billion.

Analysts said it was also due to high fares and low capacity compared to what was happening pre-pandemic.

CEO Alan Joyce said in Tuesday’s release that the aviation supply chain had begun to stabilise after COVID-19 as he again claimed the airline was making moves that would force air fares lower.

“We’re able to put some of the spare aircraft and crew we kept in reserve back in the schedule. That’s combining with lower fuel prices to help put downward pressure on fares, which is good news for customers,” Joyce said in the statement.

The airline said Qantas’ domestic capacity will exceed pre-COVID-19 levels by the end of June (the end of the financial year) while the international capacity will reach 80% of pre-COVID levels.

Mr Joyce said the airline would be at 93% of pre-Covid levels by the end of this year as forward bookings continued to “indicate strong travel demand”.

Qantas said its local recovery is being lifted by higher activity between Sydney, Melbourne and Brisbane but its international capacity is being held back by operational delays and staff shortages.

“Jet fuel prices remain elevated but recent falls will deliver a cost improvement in 2H23, which is partly offset by adverse movements in foreign exchange for an overall benefit of $150 million.

“Adverse bond rate movements are currently expected to have a $40 million non-cash impact-on provisions in 2H23.

“Qantas Loyalty remains on track to reach the top end of its FY23 Underlying EBIT target of $425 million to $450 million,” the airline said in Tuesday’s statement.

The airline also said it was close to finalising its industrial agreements with staff.

“The Group has now finalised 38 enterprise agreements under its revised wage policy, representing around 80 per cent of its total workforce covered by EBAs.

“These employees are eligible for a $5,000 recovery boost and around 20,000 employees are expected to be eligible for a recovery bonus of up to $6,500 based on the current Qantas share price, vesting after its full year results in August 2023.”

Qantas said the existing $500 million buyback which was announced in February, is 80% complete at an average price of $6.49 per share. The extra $100 million will mean there is around $200 million left.

“Including the additional buyback announced today, the Group’s net debt is now expected to be between $2.7 billion and $2.9 billion at June 30, which is significantly below the bottom of its revised target range of $3.7 billion to $4.6 billion,” the update said.

The airline also revealed Former American Airlines chief and chairman Doug Parker will join the Qantas board from Tuesday while current director Michael L’Estrange will retire at the annual meeting in November.

The update left investors unmoved and the shares eased 2.1% to $6.36.