Qantas to buy new Dreamliners as it swings to $975 million annual pre-tax profit

Australia's flagship carrier Qantas has opened new avenues for growth on international routes after it committed to buying a fleet of new Boeing 787-9 Dreamliners after swinging to a A$975 million annual pre-tax profit.

In an indication of its confidence in the outlook, Qantas is set to return $505 million in cash, or 23¢ a share, to shareholders in early November, and cut the stock on issue.

However, the decision to opt for what effectively was a special dividend for tax purposes – rather than a share buy back – did away with a form of safety net for the stock.

According to analysts, a share buyback would have allowed the airline to artificially support the stock in case of any weakness.

Qantas chief executive Alan Joyce said he would take a "prudent approach" to buying more of the 787s in coming years.

Shares in Qantas dropped 6 per cent today amid concerns that the purchase of new planes signaled the airline would seek to boost market share on international routes and a lack of guidance for the new financial year.

"The market globally is very concerned about capacity growth," The Sydney Morning Herald quoted Macquarie equities analyst Sam Dobson. "If you increase capacity, typically yields come down."

In August 2014 Qantas reported a record loss of A$2.8 billion, writing down the value of its ageing fleet.

The airline has launched an aggressive "transformation program" in recent years, which includes job cuts and reducing capacity.

The carrier also today announced that it had placed an order for eight new Dreamliner planes from Boeing, to be delivered and brought into service from 2017 onwards.

The jets would replace the older planes on the company's roster.

Joyce praised the quick response of the business to turn fortunes around.

"We are halfway through the biggest and fastest transformation in our history," Joyce said.

"Without that transformation, we would not be reporting this strong profit, recommencing shareholder returns, or announcing our ultra-efficient Dreamliner fleet for Qantas International.

"We have reshaped our business for a strong, sustainable future - and because we moved quickly and made tough decisions early, we have strong foundations to build on."

In February 2014 Qantas announced it would cut 5,000 jobs, scrap unprofitable routes, and retire ageing aircraft as part of its plan to reduce costs by $2 billion over the next three years. (See: Qantas to slash 5,000 jobs; cut costs by $2 bn)