QF $618 million half - year profit

[flying1977]

An outstanding effort from QF management and staff.

Thumbs up to our premium national carrier!

About Qantas - Newsroom

 

[Mal]

Interesting to see they're now reporting separately on the profits for the Frequent Flyer Scheme:

Loyalty

The Loyalty Segment reported a PBT of $62 million. The result included revenue of $399 million primarily from the redemption of Qantas frequent flyer points for flight and other awards. Total costs for the period were $337 million with the majority of costs being the purchase of airline seats from Qantas group airline businesses.

Now, why on earth are fuel surcharges so high?

Total fuel costs for the six months to December 2007 were $28 million lower than the same period last year. The underlying into-plane fuel price was 11.9 per cent higher than the prior year, increasing costs by $175 million, while increased flying added $68 million in costs. Hedging benefits were $147 million higher than the prior half-year before an adverse effect of hedge accounting ineffectiveness which increased costs by $57 million. Favourable foreign exchange rate movements reduced fuel costs by $203 million. Fuel costs would have been $26 million higher had it not been for SFP initiatives delivered during the half-year.

The fuel surcharge was increased around 4 weeks ago. The sums don't add up for me...

 

[flying1977]

Loyalty is now a segmented business, I would expect to see some very positive changes from Qantas Frequent Flyer in the coming year.

 

[swissbignose]

I would expect to see some very positive changes from Qantas Frequent Flyer in the coming year.

Positive from whose perspective?

 

[Warks]

The fuel surcharge is obviously a complete farce!! Put it into the ticket price if they just want to jack up prices.

[comments not made by a Qantas shareholder]

 

[moa999]

With fuel going over $100 a barrell, fuel surcharges are likely to go up.
and Qantas will feel more of the heat as their hedges -- which contriibuted $135m in the half roll off

 

[Mwenenzi]

With fuel going over $100 a barrell, fuel surcharges are likely to go up

...and Qantas will feel more of the heat as their hedges -- which contributed $135m in the half roll off

Has been in the press that QF have hedged 75% (?) of the fuel needed. That will NOT be a $100 barrel. They can jack up the surcharge because they think they can. The TV news tells all the punters the oil price is going up. But at the same time QF tell the financial markets they are doing good job control fuel costs due to hedging

 

[straitman]

Has been in the press that QF have hedged 75% (?) of the fuel needed. That will NOT be a $100 barrel. They can jack up the surcharge because they think they can. The TV news tells all the punters the oil price is going up. But at the same time QF tell the financial markets they are doing good job control fuel costs due to hedging

.... and on the later news they are now talking about jacking up the fine fines AGAIN :!: :evil:

 

[Mal]

.... and on the later news they are now talking about jacking up the fine fines AGAIN :!: :evil:

Of course, the fact that Qantas quite clearly told their shareholders today that "Fuel costs down 1.6%" (Half year results to end Dec) mean nothing about how much fuel really costs Qantas, and how much the sham of Fuel Surcharges really is

 

[NM]

With fuel going over $100 a barrell, fuel surcharges are likely to go up.
and Qantas will feel more of the heat as their hedges -- which contriibuted $135m in the half roll off

Hang on a minute. The last fuel fine rise was blamed on the price of oil cracking the US$100/barrel mark at the beginning of January. Since then the price has been down in the low-mid US$90s/barrel. It seems a bit royugh to justify two consecutive rises on the price exceeding the same threshold.

 

[JohnK]

Not that hard to achieve with regular fuel surcharge increases and the ability to charge whatever airfare you like and have no fear of losing business.

I hear the price of crude has just gone up another dollar so must be time for another fuel surcharge increase....

 

[simongr]

Thing is that if the the airfare included the fuel surcharge in the base fare they could just jack up the price however they liked anyway - at least this way we have visibility?

 

[Platy]

Can someone with greater accounting acumen than my poor lowly science trained brain please explain why the article cites redemption of awards as revenue generating...:shock:

 

[drron]

Thing is that if the the airfare included the fuel surcharge in the base fare they could just jack up the price however they liked anyway - at least this way we have visibility?

Yes this way we can see how much more we are being charged for "free" awards.

 

[simongr]

I did think about that as I typed my response but I was referencing more paid flights rather than awards.

 

[simongr]

Can someone with greater accounting acumen than my poor lowly science trained brain please explain why the article cites redemption of awards as revenue generating...:shock:

I think that when a flight is paid for a certain % is allocated to the FF program. As the service has not been provided at that point QF can not recognise the revenue from that so that put into the balance sheet as a provision. When the award is redeemed QF take some of the provision out of the BS and put into revenue.

 

[NM]

I hear the price of crude has just gone up another dollar so must be time for another fuel surcharge increase....

Actually, the price has dropped US$1.49 since yesterday. It was US$98.89 yesterday and is $US97.50 now according to Crude Oil Price Forecast

 

[NM]

Can someone with greater accounting acumen than my poor lowly science trained brain please explain why the article cites redemption of awards as revenue generating...:shock:

I assume it works this way (but may be wrong of course):

Qantas Frequent Flyer (think of this as another company and separate from Qantas Airways) sells frequent flyer points to its customers such the banks, hotels, rental car companies etc. The when a member of the Qantas FF programs redeems an award ticket, Qantas Frequent Flyer purchases the seat from Qantas Airways.

So Qantas Frequent Flyer receives revenue from selling FF points to banks etc.

And Qantas Airways receives revenue from Qantas Frequent Flyer when an award ticket is "purchased".

The profit made by Qantas Frequent Flyer is the difference between the revenue earned from selling points and the cost of the award seats it purchases from Qantas Airways (and other partner airlines) less the costs of operating the FF program (advertising, mailing, service centre etc).

 

[burmans]

Hang on a minute. The last fuel fine rise was blamed on the price of oil cracking the US$100/barrel mark at the beginning of January. Since then the price has been down in the low-mid US$90s/barrel. It seems a bit royugh to justify two consecutive rises on the price exceeding the same threshold.

What is relevant however is not the spot price of oil but the net cost to Qantas after hedging. This has to be edging up all the time as hedging facilities run out and need to be negotiated. I can imagine that in the not too distant past people were prepared to lock on prices of quite a lot lower than $100, can't imagine they would be offering Qantas the same terms if they were to ask today.

 

[serfty]

I assume it works this way (but may be wrong of course): ...

Don't forget that with this model, Qantas airways must also purchase frequent flyer points from Qantas Frequent Flyer whenever a member flys on an eligible flight operated by Qantas Airways (or a partner).