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SYDNEY. –  Australian flag carrier Qantas said yesterday it had bounced back into the black as aggressive cost-cutting and its alliance with Emirates helped slash losses at its troubled international arm. The airline posted a profit of Aus$5 million in the 12 months to June 30, a major improvement on the historic Aus$245 million loss the previous year, when soaring fuel costs and industrial action hammered the bottom line.

Its underlying profit before tax – the airline’s preferred measure of financial performance – was Aus$192 million, up from Aus$95 million 12 months ago.

Revenue inched up 1,1 percent to Aus$15,9 billion, with earnings boosted by a Aus$125 million settlement it received from US-based Boeing after putting back delivery of its 787 Dreamliner jets, which have suffered lengthy production delays.

“The market is very tough. But we are focused on the elements we can control,” said chief executive Alan Joyce as the carrier reversed its first annual loss since privatisation in 1995.

“We have Australia’s leading airlines and loyalty business – and we have a clear strategy to build an even stronger business for the future.”
The result was embraced by the market, with Qantas shares surging 13,82 percent to close at Aus$1,40.

The group’s international division continued to struggle, posting a loss of Aus$246 million.
But that compares with a loss of Aus$484 million the previous year, signalling Joyce’s strategy of scrapping less profitable routes, expanding into Asian markets and hooking up with Dubai-based Emirates is paying dividends.

“We have made considerable progress with our turnaround plan for Qantas International and we remain on track towards our target for the business to return to profit in FY15,” he said.

Under the Emirates alliance, Qantas
has shifted its hub for European flights to Dubai from Singapore, which Joyce said had given the group a strengthened position on routes to Europe, the Middle East and North Africa.

“Bookings have been very positive, running at about twice the level of Qantas’s previous codeshare arrangements for flights to Europe,” he said, adding that the full benefits were expected to flow from 2015.

“We have reduced Qantas International’s cost base by 5 percent, having withdrawn from loss-making routes, retired ageing
aircraft and completed the reconfiguration of nine Boeing 747s and all 12 of our

A380s, resulting in improved fleet economics.”
He added that the group’s focus “remains squarely on making Qantas International a competitive and sustainable business that can ultimately grow again”.

IG Markets analyst Stan Shamu said the result was above estimates.
“The international arm looks to be on track with its commitment to break even by the end of FY14,” he said.

“The result illustrates that the Emirates deal is working and the strategic move to a hub in Dubai should pay off. And the one-off cost of the Dubai hub will drop out of the books next year, increasing earnings further.”

Earnings from Qantas’s domestic business totalled Aus$365 million, down from Aus$463 million – still hugely profitable but under increasing pressure from key rival Virgin Australia, which reports its annual results on Friday.

Virgin, whose major shareholders include Singapore Airlines, Etihad and Air New Zealand, recently completed the purchase of a 60 percent stake in low-cost Tigerair Australia to boost its rivalry with Qantas.

While Qantas did not deliver any forward guidance “due to the high degree of volatility and uncertainty in the competitive environment, global economic conditions, fuel prices and foreign exchange rate”, Joyce remained upbeat.

“Our financial position has been strengthened by the actions we have taken over past 12 months: reducing debt, extending our maturity profile and taking a prudent approach to capital expenditure,” he said.

“We will continue to be disciplined in managing capital expenditure and costs, while improving the customer experience and engaging our people to
provide the best possible service.” – AFP.