Qantas shares take off as it upgrades profit forecast

Qantas has lifted its profit forecast for the December half as rampant consumer demand continues to buoy the sector’s COVID-19 recovery despite capacity restraints and inflated fuel costs.

The airline now expects to book between $1.35 billion and $1.45 billion in underlying profit before tax in the first half of its financial year, up $150 million from a previous guidance given in October. Net debt is now expected to fall to an estimated $2.3 billion and $2.5 billion by 31 December, around $900 million more than previously predicted, the company said in a statement to the ASX.

“Consumers continue to put a high priority on travel ahead of other spending categories and there are signs that limits on international capacity are driving more domestic leisure demand, benefiting Australian tourism,” the statement said.

The carrier’s share price surged by more than 5 per cent to $6.19 after market opened on Wednesday morning.

Qantas shocked the market in October when it predicted a return to profit by the end of June 2023. Its shares surged to by 12 per cent following that announcement.

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The carrier expects fuel costs to reach $5 billion by the end of the financial year in June 2023, a record for the country’s biggest carrier despite international capacity remaining about 30 per cent down on pre-pandemic levels.

About $800 million in customer travel credits issued over the pandemic have still not been redeemed, but total credit usage has reached about $70 million per month. Qantas has committed to announcing new initiatives so all of the remaining credits can be used by the end of this financial year.

Just under 80 per cent of the group’s $400 million share buyback announced in August has been completed at an average price of $5.66 per share. The group flagged the board is poised to consider future shareholder returns in February based on its low level of debt.