Qantas today proposed to distribute surplus capital to shareholders in the form of a $505 million capital return.

The proposed 23c per share cash distribution will be combined with a related share consolidation which will provide shareholders an earnings per share outcome similar to a share buy-back. The capital return and related share consolidation are subject to approval at Qantas’ Annual General Meeting in October 2015

Qantas takes a disciplined approach to maintaining its optimal capital structure and, where surplus capital is identified, to assess how to enhance shareholder value with the appropriate mix of growth and shareholder returns.

Where surplus capital enables returns to be made to shareholders, Qantas will have regard to a range of factors to determine the most efficient form to return capital,  including via share buybacks or capital returns, or a combination of these.

Qantas Group Chief Executive Officer Alan Joyce said Qantas was delighted to recommence shareholder distributions after making rapid progress with the $2 billion Qantas Transformation program.

“Our shareholders have been both patient and supportive as we have worked through the biggest and fastest business transformation in our history,” Mr Joyce said.

“Our first priority has been to put Qantas on a strong footing for sustainable future growth. We are now well into that journey, and with the Group returning to its strongest balance sheet since before the Global Financial Crisis, it is fitting to recommence shareholder distributions.”

“We will always be financially disciplined in everything we do, giving us the flexibility and options to consider future shareholder distributions alongside maintaining a strong balance sheet and investing in growth.”

The share consolidation will be implemented in a manner which ensures that each shareholder’s proportionate interest in Qantas remains unchanged following the distribution, subject to the rounding up of fractional entitlements.

The ratio to apply to the share consolidation is the volume weighted average sale price (VWAP) of Qantas shares over the consecutive 20 trading day period ending 18 August 2015, less the capital return as a proportion of the VWAP.

Based on this calculation, the consolidation ratio is 0.939 and, if approved, will reduce the number of shares on issue by approximately 6.1%.