Qantas expects to fly out of the red for the first time in more than two years for the six months to the end of the calendar year.
Based on forward bookings, the Australian carrier expects a pre-tax profit of up to A$1.3 billion ($816 million) for the period following five consecutive halves of heavy losses due to the pandemic totalling A$7 billion.
The airline cited an acceleration of strong travel demand, particularly on domestic routes, with revenue more than 100% of pre-Covid levels.
Yields on international markets are “particularly strong” but are expected to moderate as Qantas and other airlines steadily increase capacity.
Capacity on international routes is expected to rise from 61% or pre-Covid levels in the first half of the 2023 financial year to 77% in the second half, largely due to the return of Airbus A380s from storage and the delivery of three new Boeing 787-9 Dreamliners.
The airline said in a market update: “The broader operating environment remains complex with high fuel prices and high inflation, as well as higher interest rates impacting on consumer confidence.
“However, robust demand indicates that people are prioritising spending on travel above other categories, which supports the group’s ability to fully recover higher fuel costs through fares.
“Fuel prices are now around 75% higher than pre-Covid, compared with around 60% in August 2022.”
Qantas is adjusting wage increases upwards from 2% to 3% for 20,000 staff at a cost of A$40 million a year after a two year pay freeze when the bulk of the airline was in hibernation.
The pay hike is in addition to a A$5,000 “recovery boost” announced in June, 1,000 share rights issued to non-executive staff worth another A$5,000 and improved staff travel benefits.
Group chief executive Alan Joyce said: “It’s been a really challenging time for the national carrier but today’s announcement shows how far we’ve come.
“Since August, we’ve seen a big improvement in our operational performance and an acceleration in our financial performance.
“It’s clear that maintaining our pre-Covid service levels requires a lot more operational buffer than it used to, especially when you consider the sick leave spikes and supply chain delays that the whole industry is dealing with.
“That means having more crew and more aircraft on standby and adjusting our flying schedule to help make that possible, until we’re confident that extra support is no longer needed.
“Qantas’ operations are largely back to the standards people expect, and Jetstar’s performance has improved significantly in the past few weeks and will keep getting better with the extra investments we’re making.
“The fact our financial recovery has accelerated means we can invest more in rewarding our employees, who are doing an amazing job.
“We’ll spend an additional $40 million a year on permanent pay increases for our people on top of the $200 million in cash and share bonuses we’ve announced for our people.”