The prospect of Qantas whittling down its debt by $650 million and engaging in a share buyback – albeit a smallish one – came as a welcome surprise to shareholders who have become more familiar with disappointments.
And this was reflected in a 7 per cent surge in the share price.
The capital restructure provides a sense to the market that Qantas is sufficiently confident in its strategy to revive earnings that it won't require the cash from the sale of freight company Star Track as a buffer against lean times.
In other words the company is confident that the work it is doing to fix the international business will get traction. Certainly the tie-up with Emirates, which gives Qantas the use of a phantom network, is a big step in the right direction from a financial perspective.
But there was no clear evidence from the company's financial update on Thursday that there has been any stemming of the losses from Qantas's international mainline operations.
Qantas boss Alan Joyce told the market that in the current half underlying profit would range between $180 million and $230 million. At first blush this seems to stack up fairly well against the expectations of the stockbroking analysts, who were looking for $149 million to $220 million.
But at this stage it is not clear if all the analysts were expecting a roughly $130 million payment from the aircraft manufacturer Boeing to be included in the underlying profit.
This compensation payment windfall is included in Qantas's profit forecast.
There may have been improvements in the international division and deterioration in the domestic business. This is not yet clear.
The company said group yield was expected to be lower this half than in the first half of the 2011-12 financial year largely due to the increased capacity in the domestic market.
Qantas and Virgin have embarked on a massive capacity war over the past six months as Virgin tries to grab share of the business market and Qantas fights to retain its 65 per cent share of the overall market.
The strategy has put pressure on the yields of both airlines. Qantas needs to rely on strong numbers from the domestic business and from its Frequent Flyer operations to offset the performance of its troubled offshore operations.