Qantas 1st-Half Falls 9.6% on Fuel Spending, Job Cuts (Update2)
Feb. 16 (Bloomberg) -- Qantas Airways Ltd.,
Australia's biggest airline, said first-half profit fell 9.6 percent as fuel costs rose to a record and it made redundancy payouts to workers.
Net income fell to A$352.6 million ($261 million) in the six months ended Dec. 31, from A$390 million a year ago, Sydney-based Qantas said in a statement today.
The carrier was expected to post profit of A$357 million, according to the median forecast of six analysts surveyed by Bloomberg News.
Chief Executive Officer Geoff Dixon has pledged to cut costs by A$3 billion by fiscal 2008 to counter rising fuel expenses. To reach the target, low-cost domestic carrier Jetstar will start to fly international routes, and he's considering moving maintenance jobs overseas, where labor is cheaper.
``All our business transformation initiatives are now focused on enabling Qantas to meet its future expenditure commitments and profit projections with a fuel cost above $60 a barrel,'' Dixon, 66, said in the statement.
The company today reaffirmed that 2006 profit won't match last year's. The stock fell 5 cents, or 1.2 percent, to A$4 at 10:14 a.m. in Sydney.
Qantas shares had added 10 percent in the past 12 months before today, compared with a 2.2 percent decline by the 10- member Bloomberg Asia Pacific Airlines Index and a 7.2 percent increase in the 30-member Bloomberg World Airlines Index.
Qantas's fuel bill, the airline's second-biggest expense after labor, rose 58 percent to A$1.3 billion. The carrier has said its fuel costs may rise A$900 million in fiscal 2006, ending three straight years of net income growth.
Jet Fuel
Dixon raised the fuel surcharge on fares for a fourth time during the half, boosting the levy on international flights by A$75.
Jet fuel traded at an average $72.76 a barrel in Singapore in the half, 35 percent more than a year earlier, according to oil-pricing service Platts. The price of jet fuel surged as much as 77 percent last year to a record $85.36 a barrel on Oct. 3. It closed at $73.19 yesterday, 14 percent below the record.
The world's airlines lost $6 billion in 2005, the International Air Transport Association said last month. Asian carriers earned about $1.5 billion last year compared with $10 billion in losses at U.S. airlines, IATA said.
Dixon last year cut 15 percent of the airline's management staff and is considering moving some of its 6,900 engineering and maintenance crew overseas. He eliminated commissions paid to travel agents for the sale of domestic tickets and reduced the payouts for international fares.
The airline said in December it would take a charge of as much as A$80 million for the restructuring costs. Today it said those costs were A$69.6 million.
Management Changes
Qantas today changed its management structure, dividing its full-service and discount carriers between two managers. John Borghetti, the company's executive general manager, will run all Qantas full-service flights and its Australian Airlines unit.
Alan Joyce, chief executive of domestic discount carrier Jetstar, will also manage Jetstar Asia and Jetstar's international services.
Dixon said in December that Jetstar would start flying international services by January 2007 and expand to a fleet of 60 planes in five years.
Qantas reported under international financial reporting standards for the first time today.
Last edited by wing surfer; 15th Feb 2006 at 23:54.