MENU

Qantas result: flying into the red

Qantas Airways Limited (ASX: QAN) has today announced its first loss since listing on the Australian stock exchange in 1995. The company reported a net loss of $244m, mainly thanks to $376m in impairments, redundancies and restructuring in its International division. The 2011 industrial disputes with its pilots and engineers cost the company $194m, while the company’s fuel bill increased by 18% to $4.3bn.

Revenues rose 6% to $15.7bn, but operating expenses (excluding fuel) rose 5% to $9.2bn. Net finance costs rose to $170m, as the company increased its net debt (on and off balance sheet) by 8% to $7.5bn.

Qantas has announced that it has cancelled orders for 35 Boeing 787s, which will result in a reduction in capital expenditure of US$8.5bn – at list prices (although airlines hardly ever pay list prices, as they receive discounts from the aircraft manufacturers).

Yet again Qantas Frequent Flyer was the best performing part of the business, contributing $231m to a total underlying earnings before interest and tax (EBIT) of $265m, before corporate costs.

Jetstar also performed well, contributing $203m in underlying EBIT.

Going forward the company’s strategy is to turnaround its loss-making International business, expand Jetstar’s growth throughout Asia and maintain its Australian domestic market share of 65%.

Virgin Australia Holdings (ASX: VAH) has been pushing hard to win corporate customers away from Qantas, and the two are regularly trading blows over high profile customer account wins. Just yesterday, the Australian Financial Review reported that Qantas had won back NBN Co and Accenture accounts, believed to be worth a combined $10m in revenue.

In a press conference today, CEO Alan Joyce also suggested that the company was looking at divesting a number of non-core assets including its 29% stake in underperforming Jetset Travelworld (ASX: JET).

The Foolish bottom line

Airlines are notoriously bad investments – in aggregate airlines globally lose billions most years. These moves by Qantas may be well intentioned, but the results are unlikely to be a spectacular turn-around in its fortunes.

Investors would be better off considering an investment in Sydney Airports Limited (ASX: SYD), or Australian Infrastructure Fund (ASX: AIX) which have many of the airlines’ benefits, with far less risk.

If you’re in the market for some high yielding ASX shares, look no further than our “Secure Your Future with 3 Rock-Solid Dividend Stocks” report. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

More reading

Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!