Investors shrugged off the lack of a final dividend from Qantas after the airline yesterday reported another tough year with a 5.7% fall in full-year net profit to $116 million.

While the company's management concentrated on the underlying pretax profit figure of $377 million for the year, the reality is that for shareholders there was no reward, just as there was no interim payout.

Earnings were down $3 million in 2010 from the 2009 result.

The shares eased 3c to $2.48, down 1.2%, which was around the level of the overall market drop yesterday.

For all intents and purposes Qantas is now like a growth stock in a very competitive industry, conserving cash, cutting costs and trying to protect its market share against rising levels of competition.

But the airline did say trading conditions were improving following the worst downturn in aviation history last year.

And CEO Alan Joyce said if present conditions continue, underlying pre tax profit for the current half year "may be materially stronger than first half FY10".

But no dividend, yet.

"However, changes in fuel prices, FX rates and general trading conditions could rapidly impact earnings.

"It is therefore not possible to provide a more specific forecast at this time given the volatility and uncertainty of the aviation market", he said in yesterday's statement.

In the statement the airline said the board was "committed to the resumption of dividend payments".

"The quantum and timing of this will depend on trading results, prevailing market conditions, the maintenance of an investment grade credit rating and the level of capital expenditure commitments.

"The Board remains focused on balancing funding requirements of the business and investing for future growth with providing dividends for shareholders.

"In this context, coupled with significant capital expenditure program associated with fleet renewal, the Board considers it prudent not to pay a final dividend.

"Future dividends will be assessed against ongoing earnings performance and capital requirements."

So basically Qantas doesn't want to incur higher debt to handle the higher investment and paying a dividend, nor is it confident enough in the market outlook to believe it can do both from cashflow.

In his statement yesterday Mr Joyce, said that, "While global trading conditions remained challenging, they continued to improve, and the Qantas Group has delivered a strong result, more than tripling its full year profit year-on-year.

"Qantas is one of the few airlines to record successive full-year profits and continues to hold an investment grade credit rating.

"The overall strength and diversity of our operations, backed by our two airline brands and portfolio business strategy, and an ongoing focus on cost and prudent financial management, saw us through the crisis and will continue to drive our business.

"The Group's two complementary airlines, Qantas and Jetstar, provided flexibility to adapt to the changing market conditions and delivered responsive and timely capacity management.

"The result was underpinned by strong performances across the Qantas Group with Qantas Airlines returning to its position as the most profitable domestic airline, and both Jetstar and Qantas Frequent Flyer had record profits."

Mr Joyce said the Qantas Group was well-placed to capitalise on the recovering international and domestic markets.

"International demand and yield across the business and leisure sectors continue to improve and domestic business demand is also strengthening," he said.

"The domestic leisure market continues to be highly competitive; however we expect this too will improve in the first half of the year."

The group expects to increase capacity in the first half of FY11 by 9.6% compared to first half FY10, whilst retaining flexibility to optimise.

Mr Joyce said all segments of the Qantas group were profitable for the year ended 30 June 2010.

"Qantas Airlines performance continues to improve (Underlying EBIT of $67 million) and it was the most profitable, and most reliable domestic airline," Mr Joyce said. "The airline's international business also improved, despite the impact of the Icelandic volcano on international operations, which resulted in lost revenue and additional costs of $46 million.

"Last year Qantas announced a three year transformation program, QFuture, to identify and deliver sustainable margin improvements, while maintaining high customer product service standards. In its first year, the program delivered $533 million in benefits across a range of business areas and is on track to deliver $1.5 billion in benefits over three years."

Mr Joyce said Jetstar delivered a record profit (underlying EBIT of $131 million), despite a challenging fourth quarter which was driven by expanding international and domestic networks, significant growth in passenger numbers and reduced unit costs.

"Jetstar has cemented its position as one of the leading low fares airlines in Australia and Asia - the world's fastest growing aviation market," Mr Joyce said. "Jetstar has been profitable every year since its launch in 2004 and this year Jetstar Asia made a profit of S$6.9 million.

"Qantas Frequent Flyer (Underlying EBIT of $328 million) delivered a record result and now has over 7 million members. The program continued to build new partnerships and benefit from the ongoing success of the Woolworths Group alliance.

"Qantas Freight also delivered improved results in what remains a highly competitive industry."

Did any readers notice the most important fact in the comments?

Qantas' frequent fliers program now generates more money than the rest of the airline put together. In fact it generated well over half the earnings before interest and tax.

That's basically a financial services group centred on a customer base, using mostly the Qantas domestic and international airlines, not Jetstar.

In a first reaction, Goldman Sachs was positive.

"No material change to our first take on the result and no reason to change our positive view," the firm told clients yesterday afternoon.

"Management remain confident of further improvement in premium travel and earnings into 1H11.

"There was a lot of questioning around the company's ability to maintain its BBB credit rating given the financing requirements of its CAPEX program.

"Management noted they are comfortable with the company's ability to maintain a BBB rating and there would be no need to raise equity.

"QAN believes that if conditions deteriorated there can be flexibility around its CAPEX program as illustrated during the GFC.

"In our view there is unlikely to be material changes to FY11 PBT consensus of ~A$740m."