Qantas' move to buy back about four per cent of its issued stock to improve the airline's ailing share price appears to have had initial success.
The airline on Thursday launched a $100 million buy-back of about four per cent of its issued shares, a move aimed at strengthening its balance sheet and improving shareholder returns.
The announcement had an immediate effect, with Qantas shares initially soaring 5.7 per cent, before closing 4.07 per cent, or five cents, higher at $1.28.
Qantas also said that it expects its underlying pre-tax profit for the six months to December 31 to be between $180 million and $230 million, compared to $202 million in the previous corresponding period.
Chairman Leigh Clifford said the airline also plans to repay $650 million of debt in January, well ahead of its June, 2013 due date.
He said the share buy back and the accelerated debt reduction would not only return value to shareholders and maintain a strong balance sheet but would allow the company to pursue growth initiatives.
"The board believes the current Qantas share price does not reflect fair value of the Group, particularly considering the underlying strength of its domestic, loyalty and Jetstar businesses and the proposed partnership with Emirates," he said.
"Our continued progress towards the turnaround strategy for Qantas International, plus cash inflows from recent transactions, gives the board confidence to approve these capital management measures."
The airline expects its total capacity to increase between one and three per cent during fiscal 2013 compared to the previous year.
However, domestic capacity would be the main driver of growth, with Qantas expecting it to be up between seven and nine per cent on 2011/12.
The company said the second half of fiscal 2013 remained volatile due to global economic conditions, higher fuel prices and foreign exchange rates.
City Index analyst Peter Esho applauded Qantas' share buy back plan, saying the strategy to return value to shareholders was sound.
"I think it's doing two things - to dismiss any short term concern in the market that they need to raise equity and financially to take advantage of what has been a very depressed share price," he said.
Qantas also said it had recently lodged applications with the Australian Competition and Consumer Commission (ACCC), the New Zealand Ministry of Transport and the Commerce Commission Singapore to seek approval for its partnership with Emirates.
The ACCC expects to release a draft determination of its decision by December and a final decision in March.