QANTAS: High fuel costs, weak Aussie dollar to blame for drop in annual profit

AN increase in fuel costs and a weaker Aussie dollar are reportedly to blame for Qantas experiencing a 17% drop in annual profit.

The popular airline announced on Thursday that despite making an underlying profit before tax of $1.30 billion for the 12 months to June 30, the result was 17 per cent lower compared with the Group’s record profit last financial year.

According to Qantas, it was the result of a $614 million increase in fuel costs from higher oil prices and a further $154 million of the foreign exchange impacts on non-fuel net expenditure.


“The result was also impacted by a $92 million non-cash expense on provisions for items including employee leave entitlements – part of an accounting requirement that means this charge increases when interest rates fall,” the group said in a statement.

It’s not all bad news however, with Qantas revealing “all key parts of the Group’s portfolio remain strongly profitable, generating significant cashflow that allows for ongoing investment as well as shareholder returns.”

Qantas Group CEO Alan Joyce said their financial year performance was particularly positive given the mixed market conditions.

“This result shows the strength of our individual businesses but also the strength of our portfolio as a whole. Even with headwinds like fuel costs and foreign exchange, we remain one of the best performing airline groups in the world,” he said.

“Domestically, our dual brand approach with Qantas and Jetstar continued to give us a leadership position in the corporate, premium leisure and budget travel categories, all with strong margins.

“Qantas International has improved its competitive position by evolving its fleet, network and partnerships. We’ve carved out some unique advantages like the Perth-London route and there is a lot of value still to be unlocked through our alliances.”

Mr Joyce also revealed that Qantas Loyalty returned to double-digit earnings growth in the second half “thanks to new revenue streams from insurance and financial services as well as improvements to the Frequent Flyer program.”

“The simple message from this result is that the Qantas Group has solid foundations to keep investing and innovating, and to keep rewarding our shareholders as a result.”