Back in black, but seatbelt sign on

Qantas has buoyed investor confidence in spite of large second-half losses after it cut debt and costs, sold off another non-core asset and flagged a reduction in capital spending.

Shares in Qantas soared 14 per cent after its underlying pre-tax profit doubled to $192 million, boosted by a $134 million gain from an accounting change.

Qantas lifted its bottom line back into the black, posting a modest $6 million full-year net profit, a year after recording its first loss since it was privatised. Revenue crept up 1 per cent to $15.9 billion.

But in a sign of the torrid trading conditions, Qantas made operational losses of $165 million in the second half as it faced stiff competition, high fuel prices and leisure travellers less willing to spend.

Qantas' premium international operations halved their losses to $246 million, but the domestic unit and Jetstar both had weaker earnings. Jetstar booked higher losses from its offshoots in Japan and Hong Kong.

In a more promising sign for the year ahead, Qantas chief executive Alan Joyce said capacity was moderating in the domestic market - the core of its earnings - while a weaker dollar would be an overall positive.

Qantas is targeting group-wide capacity growth of up to 2 per cent this year, a marked reduction in the pace of growth previously of up to 8 per cent in the domestic market.

The airline has also resumed a buyback of its shares - up to a maximum of $100 million.

Its alliance with Emirates has helped to reduce losses on routes to Europe, but the problem child for Qantas' international operations remains its flights to and within Asia. Mr Joyce said there was "no silver bullet" and the airline would take different approaches to each Asian market.

"The Asian strategy is not a big bag bang - it is not a big deal that is going to solve the issues," he said, responding to questions about whether it would pursue more airline alliances.

Qantas would not put a figure on the contribution from the Emirates alliance in its first three months. Mr Joyce said there remained "a lot of bedding down" to do but by 2014-15 he expected the full benefits to flow through.

He declined to reveal when Qantas would commit to buying the stretched version of Boeing's 787 Dreamliner, the first of which have been slated to arrive in 2016 if it pushes the "buy" button. The planes will be important to the airline's long-term expansion plans.

Commonwealth Bank analyst Matt Crowe said conditions remained challenging, with the airline losing about $165 million in the second half after stripping out the one-off accounting gain. "They have done a few things to allay concerns around the balance sheet ... [but] it is only going to get tougher as fuel prices go up," he said.

As part of a strategy to divest non-core assets, Qantas has sold its defence services division, whose main operations are at Richmond in western Sydney, to Northrop Grumman for $80 million. Qantas said it expected the new owner to retain the unit's 320-strong workforce.

Despite its more bullish sentiment, Qantas did not give earnings guidance for the next financial year, citing volatile conditions. The airline also did not pay a final dividend, continuing a policy in place since 2009.

Qantas slashed costs by 5 per cent during the year - its biggest reduction in any one year. It means the airline has now reduced costs by 19 per cent over the past four years.

The group's underlying profit included a one-off $125 million gain from a settlement with plane maker Boeing related to late deliveries of new 787s.