Qantas reports record profits on the back of high fares and an increase in bookings

Qantas does not expect demand for travel to slow as the company posts record profits driven by high fares and a booming domestic market.

The Australian airline said on Tuesday revenues would remain significantly above pre-COVID levels through 2023/24, particularly for international flights, but fares gradually fell as the industry added capacity.

Bookings indicate continued strong demand for travel, with revenue currently at 118 percent of Qantas’ pre-pandemic levels for domestic flights and 123 percent for international travel.

Qantas said it would operate slightly more domestic flights than before the pandemic by the end of the year, led by a significant increase in key routes between Melbourne, Sydney and Brisbane.

The airline’s international capacity is at 84 percent of its pre-COVID level and will reach 100 percent by March.

Qantas expects to deliver underlying pre-tax profit of between $2.425 billion and $2.475 billion in 2022/23, significantly better than previous records but broadly in line with guidance and consensus expectations.

An A380 Qantas mothballed at Victorville Airport in California’s Mojave Desert will return to service by the end of the year after maintenance and cabin modifications, while two Airbus A330s will be leased from Finnair.

The Finnish flag carrier will operate the routes on behalf of Qantas from October to the end of 2025 between Sydney and Singapore and, from the end of March, from Sydney and Bangkok.

“More parts of the aviation supply chain are returning to normal, which means we can put some of the spare aircraft and crew we had in reserve back on schedule,” CEO Alan Joyce said in a statement.

“That’s combined with lower fuel prices to help put downward pressure on rates, which is good news for customers.”

Qantas said the $500 million share buyback announced in February was three-quarters complete and it would spend an additional $100 million on the program.

Including that additional buyback, Qantas expects to close the fiscal year on June 30 with net debt of between $2.7 billion and $2.9 billion, down from a peak of $6.4 billion at the peak of the pandemic.

RBC Capital Markets analyst Owen Birrell noted that the $100 million “token lift” in the share buyback program paled in comparison to the $1.4 billion gap between Qantas’ expected year-end net debt and its target range of $3.7 billion to $4.6 billion.

He said it raised the question of whether a major move would be made in Qantas’ investment in its fleet.