OREANDA-NEWS. The Qantas Group today reported Underlying Profit Before Tax of USD 192 million, Statutory Profit Before Tax of USD 17 million and Statutory Profit After Tax of USD 6 million for the year ended 30 June 2013.

The result demonstrates the progress of the Group's strategy against a challenging backdrop, with high fuel costs, excess capacity in the domestic market and intense competition in the international market.

Qantas Domestic, Jetstar and Qantas Loyalty were all profitable, while Qantas International halved its Underlying EBIT1 losses.

The Group's comparable unit cost was improved by 5 per cent, reflecting cost reduction and productivity improvements. Qantas Transformation initiatives delivered USD 171 million of strategic benefits in FY13, and a further USD 257 million in ongoing cost management to offset annual inflation.

The result reflects a number of positive and negative impacts to Underlying PBT in FY13. Negatives included the Dubai hub transition, the carbon tax, pilot back-pay and additional start-up losses in Jetstar's new ventures in Asia. Positives included the Boeing settlement disclosed at 1H13 and a USD 134 million change in accounting estimates, applied in the second half, for the recognition of passenger revenue when tickets have passed their scheduled travel date.

Overall, these factors resulted in a net positive impact to Underlying PBT of USD 40 million.

The Group has strengthened its financial position, with positive net free cash flow of USD 372 million at 30 June and liquidity of USD 3.4 billion, comprising USD 2.8 billion in cash and USD 630 million in undrawn debt facilities. Gross debt [3] was reduced by USD 1 billion during the year.

The Group intends to continue the on-market share buyback program of up to USD 100 million initiated in December 2012.

Net capital expenditure was USD 1.4 billion in FY13, a reduction of USD 200 million compared with previous guidance [4]. Planned capital expenditure has been reduced by USD 300 million to USD 1.2 billion in FY14 and is expected to be USD 1.5 billion in FY15. After a period of accelerated fleet renewal, the Group's average scheduled passenger fleet age is now 7.9 years - the lowest since privatisation.

With fleet renewal substantially complete, the Group has moved into a period of lower capital expenditure. However, investment continues to improve the customer experience and operational efficiency.

CEO Commentary

Qantas Group CEO Alan Joyce said the level of activity and achievement across the Group over the past 12 months had been immense.

“We have launched a global partnership with Emirates - shifting our hub for Europe flights to Dubai - maintained our strong domestic market position with the Qantas-Jetstar dual brand strategy, continued building Jetstar in Asia, and achieved another record result with Qantas Loyalty[5],” Mr Joyce said.

“The market is very tough. But we are focused on the elements we can control. We have Australia's leading airlines and loyalty business - and we have a clear strategy to build an even stronger business for the future.”

In the domestic market, Qantas and Jetstar retained the Group's profit-maximising 65 per cent share.

“Over the 12 months, the domestic market grew at its fastest rate in the past eight years,” Mr Joyce said. “We responded to aggressive levels of competitor capacity growth, with the Group's domestic operations holding our strong position and contributing more than USD 450 million to Underlying EBIT.

“Our financial position has been strengthened by the actions we have taken over past 12 months: reducing debt, extending our maturity profile and taking a prudent approach to capital expenditure.

“We have also continued our policy of selling non-core assets where appropriate. During the year we sold our stake in StarTrack to Australia Post and our Cairns and Sydney Riverside catering centres to Gate Gourmet - and today we have announced the sale of Qantas Defence Services to Northrop Grumman for a price of USD 80 million for the business and other related assets.

“Our focus remains on building long term shareholder value. We will continue to be disciplined in managing capital expenditure and costs, while improving the customer experience and engaging our people to provide the best possible service.

“Customer satisfaction is strong across all our businesses and at record levels in Qantas Domestic, Qantas International and Qantas Domestic. This is a tribute to the skill and dedication of our people, and reflects the investment we are making in aircraft, training and technology.”