Despite stiffer competition and higher fuel prices, Qantas made a bottom-line net profit of $607 million in the first half of the current financial year.

Key points: Qantas delivers an 18 per cent lift in net first half profit to $607m

Qantas delivers an 18 per cent lift in net first half profit to $607m Sales revenue up by 6 per cent, driven by domestic services while international continues to struggle

Sales revenue up by 6 per cent, driven by domestic services while international continues to struggle Shareholders get an $500m back through a buyback and a interim dividend of 7 cents per share

This result is an 18 per cent improvement over its previous first-half net profit of $515 million.

But in a statement to the ASX, Qantas is spruiking it as a "record first-half profit", when viewed from an "underlying before tax" perspective — in which case it was a gain of 15 per cent to $976 million.

Behind the figures

The flying kangaroo reported its revenue lifted 5.8 per cent to $8.66 billion.

Qantas' gains were driven by its domestic and budget flights business — with earnings from Qantas Domestic up 20 per cent to $447 million, and Jetstar's earnings rising 16 per cent to $318 million.

On the other hand, its international flights segment was not as stellar, with its earnings down 6 per cent to $222 million.

Earnings from its rewards program Qantas Loyalty gained 2 per cent to $184 million.

At a media conference, Qantas' chief executive Alan Joyce said the profit "comes in the face of some challenges — higher fuel costs, a competitive domestic market and international capacity growth".

"Despite that, Qantas Domestic had a record result, Jetstar Group had a record result and Qantas Loyalty had a record result."

"Qantas International held its own in a market that is producing some extremely low airfares."

Investors responded positively to Qantas' results, driving its share price 9.2 per cent higher to $5.76 (at 11:00am AEDT) — making it one of the best performing Australian stocks today.

As for its outlook, Qantas is expecting capacity on its domestic flights to fall by 1 per cent in the second half of the current financial year.

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In contrast, its prediction for international capacity is a 2-3 per cent uplift — which is lower than the 5 per cent rise it expects from its competitors on overseas routes.

No tax yet, but shareholders to get pay day

The airline disclosed an income tax expense of $250 million, but will not pay tax due to the "utilisation of of carry-forward tax losses and other temporary differences", according to its interim financial report, released this morning.

Qantas also said "up to $500 million of capital" will be returned to its shareholders.

It plans to achieve this through a $378 million share buyback, and paying Qantas investors an unfranked dividend of 7 cents per share.

The unfranked dividend means shareholders will have to foot the tax bill on their Qantas earnings.

Last year, Qantas' interim dividend was slightly more generous at 7 cents per share, 50 per cent franked — meaning the company paid half the tax.

The company expects this round of buybacks will reduce its total number of shares by 24 per cent since October 2015.

Paying corporate tax from July 1

In an interview with the ABC's The World Today, Mr Joyce signalled the airline might be in a position to start paying corporate tax again in the next financial year.

While stressing he was not providing guidance, Mr Joyce said the "carry forward" losses from previous difficult years might soon expire requiring the airline to pay corporate tax once again.

"This year if the performance is the same as last year we would expect from July 1 to be paying tax for that period," he said.

"I can't give an outlook but if we make the same amount of money, then we will erode all of the tax losses of previous years and we will be starting to pay tax in the next financial year."

Mr Joyce's optimistic expectation comes as he takes a high profile in a campaign with the Federal Government to cut Australia's corporate tax rate in line with the United States.

"I think Australia will become uncompetitive if it doesn't fix this corporate tax issue because it will mean that we cannot generate jobs and we cannot generate increases in pay above inflation and it means everyone will suffer," he said.

Mr Joyce's campaign for a corporate tax cut coincides with caution from Reserve Bank governor Dr Philip Lowe who warned last week that cutting corporate tax at the expense of higher deficits would be "a big mistake".

However, Mr Joyce said Dr Lowe's comments needed to be viewed in context of concerns about Australia's competitiveness with low tax nations.

"I'm sure he would be the first to say that the best thing to help with the deficit and get back to budget balance is a growing Australian economy," he said.

"I'm sure the last thing he [Dr Lowe] wants to see is an Australian economy under pressure."