Australia's Qantas Airways Ltd on Thursday posted a record first-half underlying profit as its strategy of cutting capacity and hiking fares boosted domestic revenue.

Qantas booked a 15 percent rise in first-half underlying profit before tax, its most closely watched measure, to A$976 million (US$761.48 million) for the six months ending Dec. 31, above the airline's guidance range.

The airline, which controls nearly two-thirds of the domestic market, said overall revenue and other income rose 6 percent to A$8.66 billion helped by a 5 percent rise in revenue from its domestic segment.

"We're seeing continued capacity discipline in the domestic market, coupled with a product advantage that's delivering a significant profit share to the group," Chief Executive Alan Joyce said in a statement.

The airline said domestic capacity was expected to decrease by about 1 percent in the second half, which could drive ticket prices higher.

Qantas has emerged from a three-year turnaround that involved slashing staff numbers and flying its jets more hours each day to boost revenue.

The strategy worked, giving Australia's biggest airline the confidence to proceed with its ambitions to have the world's longest commercial flights operational by 2022.

Qantas also announced a buyback of up to A$378 million.

The flagship Australian carrier kept its interim dividend at A$0.07 per share.