Second-half loss tip for Qantas
Thurs "Melbourne Age"
Second-half loss tip for Qantas
July 17 2003
By Geoffrey Thomas
Perth
Qantas is believed to have plunged deep into the red in the six months to June 30, analysts said yesterday, as SARS and the Iraq war took a greater than expected toll on the airline.
Qantas is now expected to post a second-half net loss of about $34 million, compared with forecasts made just two months ago of a profit of up to $25 million.
Analysts say this will leave the airline with a full-year profit of about $317 million, compared with the record $352.5 million reported for the six months to December 31 and the $422 million of the previous year.
Qantas said in May that full-year profit would be 20-30 per cent below market expectations, prompting analysts to cut their forecasts to about $350 million.
But some have since said it would do better, with revised forecasts up to $380 million.
There is a growing belief among some Qantas followers that next month's announcement will be accompanied by news of a restructuring in a bid to cut costs in response to fierce competition on domestic and overseas routes.
Others say chief executive Geoff Dixon may hold off on any restructuring until the Australian Competition and Consumer Commission and the New Zealand Commerce Commission announce their decision at the end of September on the planned $NZ550 million ($A490 million) equity link between Qantas and Air NZ.
It is thought that Mr Dixon believes the cost cuts are necessary due to the start-up of Virgin Blue, a substantial increase in trans-Tasman competition from Emirates, falling costs for the international rivals of Qantas and a big fleet-renewal program.
JP Morgan Hong Kong analyst Peter Negline said Qantas faced a difficult transformation.
"History tells us Mr Dixon is happy to roll with the punches and is unlikely to shy away from hard decisions as Qantas reinvents itself."
Analysts say Mr Dixon is in a bind with a fleet that is one of the oldest in the region, a legacy of previous chief James Strong, who baulked at buying aircraft.
Fuel prices are still high and some elements of the fleet, such as the 20-year-old 767-200 and 747-300, are fuel guzzlers.
But withdrawing them from the domestic fleet has a downside as Virgin Blue takes delivery of the thrifty 737-800.
Mr Negline said Qantas did have new planes on order but had to order another 90 for delivery over the next 10 years to keep up with the competition.
Virgin Blue has 28 per cent of the domestic market, from 18 per cent a year ago. Qantas has said it will defend its 68 per cent share, sparking speculation of a fare war.
Qantas has already shed 2800 staff.
-West Australian
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