Qantas Airways expects recovering demand for air travel to lift earnings growth this year after returning to profit in the second half from a year ago, but warned of volatile trading conditions.
Australia's largest airline, one of the few profitable global carriers during the worst downturn in aviation history, disappointed some investors by refusing to signal a return to dividend payments as tough economic conditions and stiff competition forced it to cut ticket prices.
But its fast-expanding low-cost subsidiary Jetstar and profitable frequent flyer programme helped it ride out the worst of the global recession.
"You have to look at this business as a portfolio. Things are definitely improving. Overall, it was a solid result. I am a bit disappointed in the lack of dividend," said Constellation Capital Management investment analyst Brian Han.
Sydney-based Qantas said its January-June net profit was AUD$54 million (USD$48.6 million) compared with a loss of AUD$93 million in the same period a year ago.
Full-year net profit was AUD$112 million, down 4.3 percent from a year ago.
Underlying pre-tax profit was AUD$377 million for the year, at the higher end of management's guidance of AUD$300 million to AUD$400 million.
Chief executive Alan Joyce said underlying pre-tax profit for the first half of the 2011 financial year would be "materially stronger" than a year ago but warned changes in fuel prices, foreign exchange rates and general trading conditions meant it was impossible to provide more specific forecasts.
However, it said key markets were recovering.
"International demand and yield across the business and leisure sectors continue to improve and domestic business demand is also strengthening," he said, tipping an improvement in the Australian domestic leisure market despite stiff competition.
Singapore Airlines last month reported a better-than-expected first quarter profit due to improving passenger and freight traffic.
Qantas said international yields, the revenue it makes on each passenger for every kilometre travelled , still remained well below 2008 levels. The airline did not declare a final dividend but said it remained committed to the resumption of shareholder returns.
Qantas said it expected to increase capacity in the first half of the 2011 financial year by 9.6 percent. A bulk of the growth would come from Jetstar in the Australian domestic market, New Zealand and Asia.
Joyce said Jetstar would continue to expand in Asia from its Singapore hub and was actively looking at opportunities in China. The airline also said it was on track to deliver AUD$1.5 billion in cost savings over three years.
Qantas said in April disruptions to European flights after an ash cloud from an Icelandic volcano grounded air traffic had a total impact of AUD$46 million in costs and revenues for the year. A British Airways industrial dispute and political unrest in the Thai capital Bangkok also impacted earnings.
*Reuters