It really is quite grim
Qantas profit diving
Article from:
</IMG>Geoff Easdown
April 15, 2009 12:00am
THE fortunes of national carrier Qantas have crashed, with pre-tax profit expected to fall by more than $1 billion this financial year.
The airline, hurting because of a slump in business and first class ticket sales, will cut 1750 jobs, mothball 10 of its aircraft and defer the delivery of new jetliners, including four Airbus A380 super jumbos.
Chief executive Alan Joyce revealed the airline would record a loss in the half-year to June 30 - only the second time this has happened since the company was privatised in 1993.
The last loss, in 2003, occurred after the SARS epidemic devastated bookings.
Yesterday's shock downgrade, from a previously forecast pre-tax profit of $500 million to something between $100 million and $200 million at June 30, contrasts markedly with the $1.4 billion record profit announced last August.
The news saw Qantas shares dive almost 10 per cent but then recover to close 4 higher at $2.
"We have no choice but to lower our profit forecast and make major changes to ensure Qantas can weather the current commercial environment," Mr Joyce told reporters.
"This means moving immediately to reduce capacity in those areas of our business facing the greatest impact of market deterioration."
Mr Joyce admitted that Qantas was losing money on Pacific flights to the United States which not long ago generated 15 per cent of the carrier's total profit.
The airline also was "struggling" to stay profitable on flights between Australia and London, he said.
Mr Joyce blames corporate belt-tightening for the slump, noting that high-yield long haul business traffic is down 15 per cent on last year.
At the same time rival carriers have added capacity, undermining profit.
Seat capacity had grown 30 per cent across the Pacific and there is significant discounting by all carriers operating the route, he said.
"We have also seen international capacity in and out of Australia growing by 11 per cent.
"There has been extensive discounting by Singapore Airlines, Emirates, right across the board."
Domestic business travel is in similar decline, Mr Joyce said at yesterday's briefing.
The remedial measures Mr Joyce has ordered will see 1750 jobs disappear, with 500 managers and 1250 staff forced to relocate, take long-service and unpaid leave or "as a last resort" be declared redundant.
Qantas will also defer new aircraft deliveries, including four of the 16 A380 super jumbos ordered from Airbus.
Agreement also had been reached to push back the delivery of 12 Boeing 737-800 airliners which were to be used on Qantas domestic flights.
Qantas offshoot Jetstar will also be unlikely to get its 15 new generation 787-8s Dreamliners by the planned date of May 2010 with Qantas pressing Boeing to delay their arrival.
Mr Joyce declared that Qantas still remained one of the strongest airline groups in the world despite what had been "a rapid and significant deterioration in trading conditions" brought about by the global economic downturn.
"The aviation industry at the moment is suffering dramatically because of the financial crisis," he told reporters.
"We are today making the corrective action that Qantas has also done in the past to make sure its long-term success and viability is assured.
"We have gone through SARS, September 11 and we have managed a lot of crises," Mr Joyce said.
"We are one of the longest operating airlines in the world, and the reason why we continue to survive and grow is because we act fast, we act decisively and that's what we are doing today."
While Qantas is struggling, it continues to fare better than its long-haul rivals, British Airways, Cathay Pacific and Singapore Airlines
British Airways says it is burning pounds pound stg. 2.7 million ($A6.01 million) cash a day because of falling sales. Cathay warned its 14,000 staff last month that it faced very difficult decisions about its network and the company.