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Qantas forecasts huge fall in full-year profit

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Arab Today, arab today Qantas forecasts huge fall in full-year profit

Sydney - AFP

Australian flag carrier Qantas warned Tuesday its full-year profit could dive by up to 90 percent on the back of steep losses in its international arm, sending its share price plunging to all-time lows. The airline said it expected underlying profit before tax -- its preferred measure of financial performance -- to be Aus$50-100 million (US$49-98 million) in the year to June 30, compared with Aus$552 million in the previous year. In a statement to the stock market, the carrier blamed worsening global operating conditions driven by the European economic crisis and its highest ever fuel bill. A soaring Australian dollar and a bitter battle with unions over wages and conditions that saw chief executive Alan Joyce ground the entire fleet for 48 hours in October also cost the airline dearly. The warning saw the embattled company\'s shares plunge nearly 20 percent to an all-time low of Aus$1.140 before closing down 18.6 percent at Aus$1.155, on a day when the overall market ended higher. Qantas\'s international business is expected to post a loss of over Aus$450 million, more than double the loss of Aus$216 million in the last financial year. In contrast, its far healthier domestic unit and low-cost offshoot Jetstar are expected to book a combined profit exceeding Aus$600 million. \"We remain focused on returning Qantas international to profitability in 2014 and for Qantas international and domestic combined to exceed their cost of capital on a sustainable basis within five years of August 2011,\" said Joyce. Former Qantas chief economist Tony Webber told ABC radio it was the worst result he could remember for the airline. \"I\'ve never seen a deterioration in Qantas international profitability that big as far as I\'m aware,\" said Webber, now an associate professor at the University of Sydney. \"That\'s quite an astonishing loss.\" In a bid to halt the dramatic earnings slide, Joyce last month announced Qantas would split its international arm from its domestic operations. Each of the two entities, currently combined as Qantas Airways, will run as separate businesses from July with their own chief executives and reporting of financial results. The move came days after Joyce said 500 jobs would be axed in Qantas\'s heavy-maintenance and engineering operations. \"We have taken decisive action to mitigate losses in Qantas international by withdrawing from loss-making routes, reducing capital investment, and transforming Qantas engineering,\" Joyce said Tuesday. \"The introduction of a new Qantas Group structure with dedicated CEOs for Qantas international and Qantas domestic will bring further rigour to our business.\" Joyce said the restructuring programme is expected to incur costs of up to Aus$380 million in the 2011/12 financial year but would result in more than Aus$300 million in annual benefits once in place. He added that the carrier had a cash balance of more than Aus$3 billion and \"remains in a strong funding position\". The group has money in place for most of the new aircraft it plans to receive in 2012/13, and intends to fund the rest from a combination of cash and debt, he said.

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