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Qantas first half profit declines 7.5pc to US$654 million

QANTAS Airways first-half operating profit fell 7.5 per cent before taxes in the six months through December 31 to A$852 million (US$654 million), the company revealed.

Qantas CEO Alan Joyce, in the final six months of a three-year turnaround plan, said confidence is returning in the Australian economy and that trend would continue in the second half of the fiscal year.

After ending unprofitable long-haul routes to Europe, Mr Joyce is focusing on shorter legs within Asia for growth.

"We're very confident about our position against our major domestic competitor, both domestically and internationally," he told Bloomberg.

Encouraged by cheaper oil, Qantas is among many that are expanding even as capacity addition has pushed down airfares.

Qantas' main domestic rival, Virgin Australia last week said demand was subdued after reporting a loss and deferring initial deliveries of a 40-plane order from Boeing worth US$4.4 billion.

Qantas is "getting more efficient," said Evan Lucas, a market strategist at IG Ltd in Melbourne. "It means they are taking market share away from Virgin and that's the first time we've seen in about three years. It's impressive."

Qantas said China was a key growth area with a prospect of increased Chinese tourism after resuming services to Beijing from Sydney.

"The Chinese growth into Australia continues to be unbelievably significant," Mr Joyce told reporters.

All the same, Qantas said it's on target to deliver A$2.1 billion in savings by the end of June from Joyce's turnaround programme. From then on, Qantas is targeting an annual average of A$400 million in cost and revenue benefits, Joyce said.

This year, Qantas will receive the first of its eight Boeing Dreamliners and in 2018 will start the world's first direct flights between Perth and London, a 17-hour non-stop flight.