On a net profit line, Qantas reported a statutory profit after tax of $204 million in the half. Chief executive Alan Joyce said the result showed the airline was executing the right turnaround plan with discipline and speed. "The decisive factor in our best half-year result for four years was our complete focus on the Qantas Transformation program," Mr Joyce said. "It's clear that without the impact of transformation, we would not be announcing a profit today. The factors that helped drive the return to profit included a $374 million benefit from cost-cutting, $208 million from reduced depreciation, $162 million from increased revenue per seat kilometre, $59 million from the removal of the carbon tax and $33 million from lower fuel prices. Qantas shares were trading 12c higher at $2.93 at 11:15am on Thursday.

Qantas chief executive Alan Joyce: 'Without the impact of transformation, we would not be announcing a profit today.' Credit:Louise Kennerley "We expect the positive share price momentum to continue for Qantas as the transformation benefits continue to deliver and the benefit of the lower oil price," Citi analyst Anthony Moulder said. "Given the lower oil expense being indicated, as well as the lower depreciation expense and coupled with the higher transformation savings, the strong momentum of the Qantas share price is expected to continue." Most analysts had expected Qantas would report a full-year depreciation benefit of about $250 million after making larger write-downs last year, but they may not have factored in benefits from retiring the carrier's aging Boeing 767 fleet during the half. Qantas said it was now targeting $675 million of benefits from its cost-cutting program for the full year, up from an earlier target of $600 million. The airline's domestic division reported underlying earnings before interest and tax (EBIT) of $227 million, up $170 million from the prior year. The international division reported EBIT of $59 million, a turnaround of $321 million compared with the prior year. Jetstar reported EBIT of $81 million, a $97 million improvement from last year. Qantas Loyalty reported EBIT of $160 million, up 10 per cent from last year, while Qantas Freight reported EBIT of $54 million, up $43 million from last year.

Qantas said the outlook for the second-half operating environment had improved, with overall demand stable but demand mixed in the Australian domestic market. The airline said it would increase capacity by 1.5 per cent to 2 per cent in the six months to June. Underlying fuel costs were expected to be no more than $4 billion at current prices, down from $4.5 billion last year. That means it is expected to save more than $450 million on fuel in the second half. "A large component of the capacity growth is coming from increased utilisation on international markets," Mr Joyce said. "We are not giving a domestic capacity forecast given we've seen a huge amount of flux in domestic capacity." It has not provided any formal full-year profit guidance, but UBS said its numbers would be under review as a result of positive commentary on conditions. Qantas shares have more than doubled from $1.28 in mid-October and at 11:45am AEDT were up 15c at $2.96. The flag carrier has not paid a dividend since 2009 but some analysts believe there is scope for it to announce a share buyback as early as this year.

Later this year, Qantas will also need to make a decision on whether to exercise the first of a series of 50 options and purchase rights for new Boeing 787-9 aircraft that could be delivered from 2017. Sources last month said the business case for doing so was looking "robust". Mr Joyce said the airline was in talks with employees about conditions for working on the 787s so that the aircraft would bring in the right returns. Rival Virgin Australia last week reported a first-half underlying pretax profit of $10.2 million and a net loss of $47.8 million