Qantas Airways Ltd. said international flying will be at least twice as lucrative in the post-Covid era, thanks to new income from marathon direct flights that crisscross the world and deep cost cuts during the pandemic.
In its first investor day in four years, the Australian airline on Tuesday laid out the projected boost from a vast fleet overhaul and a three-year turnaround plan implemented shortly after Covid grounded travel in 2020.
The forecast for bumper profit margins suggests there will be no immediate end to soaring fares on overseas flights that are supercharging airline revenues. The optimistic outlook reflects an aviation industry that was forced to become more efficient to weather the Covid crisis, a worldwide reset that is now enriching investors.
Read more: Qantas Forecast for Seat Shortage Suggests No End to High Fares
Qantas said it also expects fatter margins in its domestic business, the airline’s earnings engine, due to rising demand and the introduction of more efficient jets. Operating profit at the loyalty unit could double by 2030 as it expands into holidays and hotels, the carrier said.
For details: Qantas Targets Loyalty Earnings as Much as A$1B by FY30
“This is a structurally different business than it was before Covid, operating in markets that have also changed,” Qantas Chief Executive Officer Alan Joyce said in a statement accompanying a 97-page investor presentation.
Qantas shares climbed 0.9% to A$6.48 at 10:53 a.m. in Sydney.
Operating profit margins at Qantas International will grow from about 5% before the pandemic to more than 8% next year, and to between 10% and 12% in following years, the airline said. Margins at the domestic business will be 18% next year and beyond, up from 13% before Covid, Qantas said.
After a multibillion dollar fleet order in 2021, Qantas can tap about 300 new Airbus SE jets and is due to receive a new aircraft every three weeks for the next three years. The airline aims to start non-stop flights linking Sydney with London and New York in late 2025 with 12 new long-range Airbus A350s.
The airline on Tuesday disclosed its first income projections for those ultra-long-haul flights, dubbed “Project Sunrise.” The A350s and Project Sunrise will deliver at least A$400 million ($261 million) of operating profit a year when all 12 aircraft are in service, Qantas said.
(Adds aircraft orders in eighth paragraph.)
