Qantas makes a big profit – but where did the money come from?

Qantas makes a big profit – but where did the money come from?

Qantas has reported an underlying profit before tax of $1.53 billion for the 12 months ended 30 June 2016 – said to be the best result in its 95-year history.

The record performance is a 57 per cent per cent improvement on financial year 2015. It means Qantas can resume dividend payments, reward 25,000 EBA-covered employees with a one-off cash bonus, and continue investment.

Summary of result

Qantas Domestic, Qantas International, the Jetstar Group and Qantas Loyalty all reported record results.

Total underlying EBIT in the domestic market – across both Qantas and Jetstar – was a record $820 million, up $191 million, and total underlying EBIT in the international division was $722 million, up $374 million.

Return on invested capital was 23 per cent, compared with 16 per cent at 30 June 2015, and earnings per share almost doubled to 49 cents.

The Qantas Transformation program continues to reshape the Group’s cost base and ability to generate revenue. It has unlocked $1.66 billion in permanent cost and revenue benefits since early 2014, including $557 million in financial year 2016, and is now outperforming, with the Group expecting to realise $2.1 billion in benefits by June 2017.

The Group’s financial position improved significantly during the year, with $2.8 billion in operating cash flow used for capital expenditure, shareholder distributions and debt repayments, and excess cash used for refinancing.

CEO comment

Chief executive Alan Joyce said the result demonstrated the success of Qantas’ strategy to build a strong, sustainable future for the national carrier.

“Our transformation program is paying dividends for our shareholders, our customers and our employees,” Mr Joyce said. “Our people can be incredibly proud of what they’ve achieved. It’s thanks to their skill and commitment that we’re announcing a record profit today.

“This was a true team performance, which shows that our strategy is the right one for the tough markets we’re operating in and the long-term opportunities we see ahead of us.

“Transformation has made us a more agile business, created value for our shareholders and given us a platform to invest for the future. Qantas is stronger than ever, but we’re also determined to keep changing and adapting so that we can succeed no matter what environment we’re in.”

Distribution to workers

Around 25,000 personnel across the Qantas Group will be eligible for a one-off $3,000 Record Result Bonus (on a full-time basis) if they are covered by an EBA that includes the 18-month pay freeze outlined as part of the Qantas Transformation program.

Combined with the bonus announced in July 2015, this now means more than $160 million in cash rewards has been set aside for non-executive employees in the past two years.

The costs of the discretionary payment will be recognised in financial year 2017, outside of underlying earnings.

The profit result is not so bright: TWU

Qantas’ full year results are masking the dangerous truth of increased security risks throughout the company’s aviation operations, according to the Transport Workers’ Union (TWU).

TWU national secretary Tony Sheldon said staff turnover was already 15% within Qantas Group itself, whilst it was estimated that turnover was as high as 40% among some Qantas contractors.

“Maintaining a stable and properly-trained workforce is vital for the integrity and security of the aviation supply chain.

“Our most recent industry survey, however, showed 43 per cent of aviation workers are in insecure work and 14 per cent had received no security training in the previous six years.

“Ultimately, instability and high turnover in the aviation supply chain could leave Qantas and its passengers vulnerable and exposed – at a time when security simply has to be the industry’s number one priority.”

Mr Sheldon said the brand values that once defined Qantas have become a relic of the past, as the company has systematically hollowed-out its workforce.

“While Qantas bosses are tipped to hand themselves bonuses on top of their executive salaries, workers on the frontline are enduring an 18-month wage freeze with thousands of them receiving a base salary lower than the national minimum wage.

“Qantas is continuing to use its market power to drive down standards in the aviation supply chain, forcing suppliers to cut costs and standards to the bone.

“Full-time Qantas workers are being replaced by part-time contractors.  Contracting companies are then forced to pay lower wages and slash conditions in order to win Qantas work.

“It’s a race to the bottom where workers are guaranteed as little as 60 hours work a month. This leads to high turnover, which is compromising service quality, safety and security.

“I don’t consider sacrificing job security, slashing wages and potentially compromising safety the ‘Spirit of Australia’.”

The TWU says contractor conditions quoted to workers by Qantas Group management to justify Qantas’ refusal to improve wages, conditions and job security within the group include:

  • Only 60 hours of work guaranteed per month.
  • No weekly guaranteed hours.
  • Three-hour shifts.
  • Split shifts.
  • Removal of traditional weekend penalty rates.

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