Qantas dropped its profits even more sharply than most analysts had predicted this morning when CEO Alan Joyce announced a 30 June financial year before tax profit of of $181million, compared to $1.4billion the previous year, or net profit after tax results of $123million versus a previous $970million.

It was bad news delivered with Joyce’s trademark soft spoken demeanour that made the mayhem in the airline sector at large seem momentarily ordinary.

But not for shareholders. Last year’s total dividend of 35 cents a share are only going to be the 6 cents already paid on the 31 December half yearly results.

There is no profit guidance for this year, although demand is now described as in equilibrium with capacity cutbacks, and yields appear to have stabilised.

In comparison to major carriers abroad, Qantas is tracking very well through the severe shocks delivered by last year’s oil spike, the global financial crisis and swine flu.

It’s big pluses in avoiding a full year loss, even though it went into group loss in the second half, are the Qantas loyalty program, which thrives on selling Qantas points to other businesses to use as rewards, and Jetstar, which is eating the Qantas domestic brand and growing strongly against the global trend in its international routes.

Qantas lost EBIT $77million dollars on its operations after one off non-recurring charges in the year, a sharp decline in its performance both over the previous year and this year’s first half, although the underlying profit was a token $4 million (versus an underlying domestic profit of $25-30 million for Virgin Blue with less than half its jet capacity.)

That is a seriously bad result, with or without non-recurring items. Jestar on the other hand lifted earnings on an EBIT basis by 18% to $137 million, which is a seriously good result.

The loyalty program, which is significantly directed at third party sales, reported an EBIT of $310 million, although Qantas emphasised an underlying earning figure of $226 million and has filed a separate presentation to the ASX as to how it now accounts for a lucrative business which it no longer has any immediate intention of floating.

Without those loyalty earnings or the $86 million profit booked on “the reverse acquisition of the Jetset Travelworld group” the results would have been awful enough to even bring a tremble to Joyce’s capacity to calmly deliver the news.

Other changes are coming. From October, as reported in Crikey and Plane Talking several months ago, Jetstar will fly in tandem with the shrinking Qantas full service Cityflyers on the Melbourne-Sydney route, to counter Tiger’s move that month to more frequency on the most precious of Qantas domestic routes.

(There will be fewer Jetstar flights from Avalon, and five a day from the Qantas domestic terminal at Tullamarine to Sydney.)

This firmly breaks the Jetstar-not-competing-with-Qantas mantra. Joyce announced a $1.5 billion, three year Q Future cost cutting program. He steered away of talking up job cuts, or conceding that the previously announced middle management reductions had not in fact happened as quickly as expected, and emphasised processes and products.

This includes the reconfiguration of Boeing 747-400s and the Airbus A380s to have larger premium economy cabins replacing some of the existing business class cabins, a type of seat that has fallen into less favour with businesses because of the GFC.

Qantas is also leasing for six years four additional A330 jets to allow Jestar to grow its international reach further pending the delayed delivery of Boeing 787s.

Joyce killed the latest rumours of an order of Boeing 777s saying the aircraft wasn’t right for Qantas, especially where it needed the giant A380s because of slot limitations, and gained a more efficient jet in terms of per seat costs as well.

He also put himself on the record as believing that the much delayed 787 will start flying this year, and Qantas will get the promised delivery of its first 787-9s, a stretched version of that jet, by mid-2013.

He might be the only airline CEO to believe this, but he is running an airline that most of his peers would envy in the current dire straits of the sector at large.