Qantas Airways: Soaring Profits, Mixed EPS Performance in H1 2025

As the aviation industry continues to recover from the COVID-19 pandemic, Qantas Airways has reported a strong set of results for the first half of 2025. The Australian flag carrier posted an underlying profit before tax of $1.39 billion, an increase of 11 per cent compared to the same period last year. However, earnings per share (EPS) lagged behind expectations, raising questions about the company's ability to translate its operational success into shareholder value.

Qantas' dual-brand strategy, which combines a premium airline (Qantas) and a low-cost carrier (Jetstar), has proven to be a successful approach in the face of rising cost-of-living pressures. Jetstar delivered a 54 per cent increase in domestic earnings compared to the previous year, driven by record-high passenger levels and a 54 per cent increase in domestic earnings. This growth was supported by a 5 per cent improvement in unit revenue and a 2 percentage point increase in load factors for the Group Domestic segment.

The Group's fleet renewal program has also contributed to its strong financial performance. The addition of 11 new aircraft and five mid-life aircraft, including Jetstar's new Airbus A321LRs and A320neos, has provided scale benefits and improved fuel efficiency, network growth, and customer satisfaction. Qantas' fleet renewal is also underway, with five A220s now in operation and expected to deliver an annual up to $9 million EBITDA benefit per aircraft compared to the Boeing 717s they are replacing.

However, Qantas' EPS performance has not kept pace with its operational success. The company reported EPS of $0.52 for the fiscal semester ending in December of 2023, which was lower than expected by some analysts. This discrepancy may be due to higher aircraft operating lease liabilities, fuel costs, labor costs, airport and government charges, and aircraft maintenance and renewal costs, which have all impacted Qantas' earnings.

Despite the mixed EPS performance, Qantas has announced that it will pay dividends to shareholders for the first time in almost six years. The airline will pay a base dividend of $250 million and a special dividend of $150 million, both fully franked at 26.4 cents per share. This decision reflects the Group's financial strength and its commitment to returning surplus capital to shareholders.

In conclusion, Qantas Airways' first half of 2025 has been marked by strong operational performance, driven by its dual-brand strategy and fleet renewal program. However, the company's EPS performance has lagged behind expectations, raising questions about its ability to translate its operational success into shareholder value. As the aviation industry continues to recover from the COVID-19 pandemic, Qantas will need to address these challenges and ensure that its financial performance aligns with the expectations of its shareholders.