Qantas Airways Ltd (QABSY) (FY 2026) Earnings Call Highlights: Resilient Profit Amidst ...

Negative Points

• Underlying profit before tax declined by $330 million year-over-year, and underlying earnings per share fell by 13%, impacted by the Middle East conflict and elevated fuel costs.

• The company has paused its $150 million on-market share buyback to prioritize investment in the business, signaling a more cautious approach to capital returns.

• Qantas is facing increased cost pressures, with total unit cost ex-fuel (TCASK) rising by 4.1%, driven by wage growth, industry costs, and higher depreciation from fleet investment.

• The company noted weakness in corporate and government travel demand due to economic uncertainty, which impacted the fourth quarter and is expected to persist into the first half of FY27.

• The retirement of the A380 fleet, beginning mid-2028, will incur significant entry-into-service costs and operational complexity, with the company expecting approximately $150 million in EIS costs in FY28 and FY29.

• The financial services sector's response to interchange rate changes is expected to impact Qantas Loyalty's earnings growth, with the greatest impact anticipated in the second half of FY27.

Q & A Highlights

Q: Can you explain the drivers behind the strong first-half FY27 TRASK guidance of 8% to 10% growth for domestic, and whether this relies on further fare increases or just the ones already pushed through? A: Vanessa Hudson (CEO) explained that the guidance reflects a combination of factors, not just fares. It includes active fare increases already taken across Qantas and Jetstar, higher seat factors, growth in ancillary revenue, and charter revenue. She noted that in Q4 FY26, much of the revenue was pre-sold before fuel price hikes, but going forward, the company will continue to dynamically manage pricing and capacity to maximize revenue. Stephanie Tully (CEO Jetstar) added that travel intentions remain high, intakes are strong, and the first half has a favorable events calendar. Markus Svensson (CEO Qantas Domestic) echoed confidence in the outlook based on strong leisure and SME demand.

Q: What is driving the reduction in FY27 CapEx guidance to $4.3-$4.6 billion, and how will the reconfiguration of bank loyalty-linked credit cards impact the Loyalty business in FY27? A: Robert Marcolina (CFO) attributed the CapEx reduction to four factors: the number of Sunrise aircraft deliveries in FY27 reduced from four to three, a stronger Australian dollar, lower capitalized maintenance due to less flying, and capital recycling from the Jetstar Japan divestment. On Loyalty, Vanessa Hudson (CEO) noted that while banks are changing their value propositions due to interchange rate changes, Qantas has reached in-principle agreements with all partners. Andrew Glance (CEO Qantas Loyalty) confirmed the direct earn construct remains, all partnerships are preserved, and the outcome is balanced for members. The greatest impact will be felt in H2 FY27, which is reflected in the 5%-7% EBIT growth guidance, but the company remains committed to its FY30 target of $800 million to $1 billion.

Q: With the announced retirement of the A380 and A330s, what are the capital benefits, and how can investors be confident the $400 million Sunrise EBIT uplift is incremental rather than replacing existing income? A: Cameron Wallace (CEO Qantas International) explained that retiring the A380 unlocks approximately $300 million in net cash flow benefits from FY28 to FY31, primarily through avoiding capitalized maintenance costs like engine overhauls. The decision provides clarity for customers and pilots on training. Vanessa Hudson (CEO) added that the plan is designed to improve earnings quality while minimizing deployed capital. The retirement timeline retains flexibility at the back end. The $400 million Sunrise uplift is part of a broader strategy where new aircraft with higher premium density (e.g., A350s) will replace older, less efficient aircraft, driving a clear pathway to a 10% EBIT margin by FY31.

Q: Is the 8%-10% TRASK guidance for H1 FY27 the limit of what you can achieve to recapture fuel costs, or is there potential to push revenue higher? A: Robert Marcolina (CFO) stated that the guidance reflects an ability to capture more of the fuel price increase than in Q4 FY26, when a large portion of tickets were pre-sold. The TRASK metric includes not just price but also load factors and ancillary revenue, which the company is actively driving. He acknowledged the point on elasticity is well-founded and that the company monitors consumer demand on a weekly basis. The guidance is based on current intakes and market conditions, but the company will continue to push revenue where demand allows.

Q: Given the CapEx reduction, paused buyback, and gearing at the top end of the target range, how should we think about the suitability of the capital framework and the viability of the international fleet changes? A: Robert Marcolina (CFO) reaffirmed that the financial framework is the bedrock of the business and is conservative by design, assuming a 10% ROIC. The confidence to move to the upper end of the net debt range is supported by over $3 billion in liquidity and a strong investment-grade rating. He noted the intention to return towards the middle of the range in FY28. The fleet investments, including for Qantas International, are expected to generate returns above the cost of capital, and the group's integrated model means benefits are captured across domestic, international, and loyalty.

Q: How are costs ex-fuel tracking, and are there any changes regarding flight attendant wages from the annual rate review? A: Vanessa Hudson (CEO) stated that the investor presentation includes a bridge showing the drivers of cost growth, which is approximately 4% excluding fuel. This includes wage growth, and industry costs like airports, security, and government charges growing ahead of CPI. The company's focus remains on driving transformation across cost and revenue to offset CPI, increasingly through automation, digitization, and AI. She did not provide specific comments on flight attendant wages but reiterated the commitment to offsetting wage escalation through transformation.

Q: Can you provide a breakdown of international performance, particularly the split between Europe and the US, and how capacity was redeployed to capture demand? A: Cameron Wallace (CEO Qantas International) detailed that the group redeployed aircraft from domestic to international, moving 787s to high-demand routes like London, Paris, and Rome, where seat factors exceeded 90%. The US market also rebounded strongly, with the A380 deployed on those routes, resulting in a 14% step-up in ASKs and RASK performance roughly flat. Africa also emerged as a connecting hub to Europe. Vanessa Hudson (CEO) added that the fourth quarter saw significant demand growth to Europe, and the network was optimized to capture displaced demand from Middle Eastern hubs.

Q: Should we expect domestic RASK growth to be even across Qantas and Jetstar in H1 FY27, and if refining margins come down, should RASKs follow? A: Vanessa Hudson (CEO) did not provide a brand-level breakdown but reiterated confidence in the group's TRASK guidance based on intakes. She stated that some RASK performance will become structural due to escalating industry costs (airports, government charges) that are borne by all operators. Therefore, RASK would not be expected to normalize in line with fuel prices. This applies to both domestic and international businesses.

Q: What are the key drivers of Jetstar's strong cost base advantage, and what is the latent capacity in the fleet if fuel prices normalize? A: Stephanie Tully (CEO Jetstar) attributed the cost advantage primarily to the new fleet's efficiency and the growth it enables, along with

For the complete transcript of the earnings call, please refer to the full earnings call transcript .