Qantas sees profits take off
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Dixon said discount carrier Jetstar will have a lower cost base than rival Virgin Blue.
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SYDNEY, Australia (CNN) -- Australian flag carrier Qantas Airways has lifted interim net profit slightly to Aust. $357.8 million ($283 million) on the back of cost savings, strong domestic demand and a recovery in international travel.
The result was above analysts' expectations and helped push the stock 3 percent higher Thursday to A$3.74.
Announcing the result for the six months to December 2003, Qantas said historically it earnt 60 percent of its profits in the first half of the financial year.
"Trading conditions so far this year show Qantas is on track to achieve a full year profit in line with this trend," it said.
Qantas traditionally has been one of the most profitable carriers in the Asia Pacific region, but last financial year its profit fell 20 percent to A$343.5 million on the second-half fallout from SARS, terrorism and the war in Iraq.
Qantas, 17 percent owned by British Airways, is the dominant domestic carrier in Australia, but has been challenged for market share in the past three years by aggressive newcomer Virgin Blue.
Virgin Blue, which was started in September 2000 by British entrepreneur Richard Branson but is now controlled by Australian transport and logistics group Patrick Corp., has built its market share to about 30 percent on the strength of discount fares.
Qantas has responded with its own slate of discount fares, and in December announced it would start flying its own low-cost domestic airline, Jetstar, in May.
Qantas CEO Geoff Dixon said Thursday the half-year result to December 2003 was marked by the airline's strong performance in the domestic market, which he said was due largely to a simplified fare structure and improved efficiency.
Dixon said while profit was up 1.5 percent, revenue of A$5.8 billion was down 4.4 percent compared with the corresponding period in 2002.
"This was entirely due to the continued impact of SARS and the war in Iraq in July, August and September when international capacity was still down by 10.5 percent," he said.
Dixon said the carrier aimed to cut net operating costs by A$1 billion over two years, with A$350 million designated for 2003-04.
He said Qantas was confident that its Jetstar subsidiary would have a lower cost base than Virgin Blue.
Virgin Blue, which floated in December with a market value of about A$2.5 billion, is also higher Thursday, up 1.2 percent higher to A$2.55.
