Long-suffering Qantas shareholders finally have something to cheer about after the flying kangaroo produced one of the great corporate turn-arounds.
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The announcement of a full-year underlying pre-tax profit of $975 million on Thursday saw the share price gain even further on the already strong gains of this year.
It is a stunning turn-around on a year ago when the airline produced a loss of $646 million. Shareholders will be asking if the profit growth can be sustained and whether there is yet more upside in the share price.
"It is an amazing result; it is a $1.6 billion turn-around from last year," says Michael Heffernan, a senior client adviser and economist with sharebroker PhillipCapital.
The airline's share price is trading at about $3.50 from about $1 in early 2014. But it is still a long way off the $6 it touched in late 2007, just before the onset of the global financial crises.
"If the economy does not fall into a hole, as I do not think it will, the outlook [for Qantas] is pretty good," Heffernan says. "Though the share price will probably not grow like we have seen over the past 12 months."
Qantas also said it would return $505 million, or 23 cents a share, to shareholders, in early November.
The airline last paid a dividend in early 2009; although analysts say Qantas could start paying dividends again next year.
Analysts say the good result is the product of cost cutting, sharply lower fuel prices and a more "rational" approach in the price war with Virgin. There has also been an easing of competition on international routes.
Ross Macmillan, senior equities analyst at Morningstar, says the airline is in a "sweet spot" at the moment for a number of reasons; including the transformation program for which Qantas chief executive Alan Joyce "should be applauded".
"It is a much leaner and more efficient airline today than it was five or six years ago," Macmillan says. "It is not a glib statement – if you look right across the business, good things are happening. Even Qantas freight recorded a record profit result."
Qantas will buy eight 787-9 Dreamliners for its long-haul fleet, to be delivered from 2017, with options to buy more and will gradually replace five older Boeing 747s.
At the results announcement, Joyce, said the airline is only halfway "through the biggest and fastest transformation in our history".
Macmillan is expecting the airline to "perform quite well" for the next two to three years.
"Looking past that [period] is difficult because things can change rapidly with regards to fuel costs, the currency and economic conditions and also competition – domestically and internationally," he says. "We regard all airlines as having a high risk because earnings are extremely volatile and cyclical and there are so many factors that are out of the control of management."
Qantas is unusual in that it is one of the riskier companies in which to be a shareholder, yet the company has a large number of small investors, analysts say.
Elio D'Amato, chief executive of shares researcher Lincoln Indicators, says: "It has been a tumultuous time for shareholders but the company is moving in the right direction. If you are a half glass full type of investor there are still good opportunities to be had, even though the share price has risen almost in a straight line in 2015."
Lincoln Indicators has not been recommending Qantas. "But I can see that if the true believers have held it for a long time that there is no reason to get out of it now," he says.
Greg Smith, head of research at Fat Prophets, says the researcher put a "buy" recommendation on Qantas in August last year when its shares were trading at about $1.30. He says the result is a vindication of the transformation plan under Joyce.
The international business is profitable for the first time since the GFC, Smith says. "The low-hanging fruit, as far as the share price goes, has been and gone, but the company will take more steps to continue to take costs out and continue its transformation plan, and make more alliances with other airlines."
