The Qantas Airways Limited (ASX: QAN) share price will be one to watch this morning.
Qantas share price on watch following strong result
- Revenue up 118% to $19,815 million
- Underlying earnings before interest and tax (EBIT) of $2,682 million
- Underlying profit before tax of $2,465 million
- $500 million on-market share buyback
What happened in FY 2023?
For the 12 months ended 30 June, Australia's flag carrier airline reported an impressive 118% increase in revenue to $19,815 million. This comprises net passenger revenue of $16,923 million (+184%), net freight revenue of $1,380 million (-30%), and other revenue of $1,512 million (+26.6%).
Qantas' underlying expenses increased at a slower rate to revenue despite a 146% increase in fuel expenses to $4,555 million. Underlying expenses rose 60.6% over the period to $17,133 million.
This ultimately led to the company reporting an underlying profit before tax of $2,465 million for the 12 months, up from a loss of $1,859 million. This was at the upper end of its updated guidance range of $2,425 million to $2,475 million for FY 2023.
All sides of the business contributed to this profit. Though, Qantas Domestic was the standout, going from a $765 million loss in FY 2022 to a profit of $1,270 million this year. This is also 63% higher than what the business recorded pre-COVID.
And while Qantas did not declare any dividends for FY 2023, that doesn't mean that funds won't be returned to shareholders.
With its net debt of $2.89 billion comfortably under its target range of $3.7 billion to $4.6 billion, the airline has announced a new $500 million on-market share buyback. This follows a $1 billion share buyback that was completed in FY 2023 at an average price of $6.19 per share. Qantas' new share buyback will commence from 11 September and run until June 2024.
Outgoing Qantas Group CEO, Alan Joyce, was pleased with the company's turnaround. He said:
These results show a substantial turnaround in both our finances and service over the past year. Flight delays and cancellations have largely returned to pre-COVID levels and we've shifted from heavy losses to a strong profit and pipeline of investment worth billions of dollars.
We safely flew almost 70 billion more seat kilometres and doubled the number of people we carried to 46 million compared to the year before. Travel demand is incredibly robust and we've taken delivery of more aircraft and opened up new routes to help meet it. The data shows customer satisfaction has improved significantly and we're constantly working to deliver great travel experiences. It's because we're in a strong financial position that we're able to invest in new aircraft, new destinations and new training facilities – all things that will make us better in the future.
Qantas hasn't provided any real earnings guidance for FY 2024. However, it has spoken very positively about its prospects over the next 12 months. It said:
The Group has entered FY24 with a very strong balance sheet, $1 billion in reoccurring cost benefits from its recovery program, and strong trading conditions as consumers continue to prioritise travel.
The airline also revealed that its total fuel bill for the first half of FY 2024 is expected to be $2.6 billion.
In respect to capacity, group Domestic capacity is expected to remain above pre-COVID levels throughout FY 2024. Whereas group International capacity will continue to recover, on track to return to 100% of pre-COVID levels in the second half.
The ever-reliable Qantas Loyalty business is on track to deliver on its FY 2024 EBIT target of $500 million to $600 million, six months earlier than anticipated, with an underlying EBIT of more than $500 million expected for calendar year 2023.
Finally, management expects its continued transformation of more than $300 million in FY 2024 to offset CPI and approximately $400 million in transitionary costs incurred in FY 2023 to unwind during the financial year.
The Qantas share price is up 36% over the last 12 months.