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20th Feb 2003, 00:26

Qantas stocks tumble
February 20, 2003

QANTAS shares were down by more than 8 per cent in today after the airline warned bookings could fall by up to 20 per cent if war breaks out in the Middle East.

Qantas shares were 31 cents, or 8.2 per cent, lower at a four-month low of $3.49 by 1142 AEDT.

Earlier, the airline reported a 129.6 per cent surge in first half net profit but investors were more worried about its forward bookings and plans to axe 1500 full time jobs.

"The result was pretty good but the statement they have made about the forward outlook and sacking people haven't garnered people's attention," Foster Stockbroking head of dealing Kevin Massey said.

ABN Amro Morgans investment adviser Kurt Telford added the fall in Qantas' share price was disappointing given the strong profit result.

"It's just characteristic of a bear market we seem to have stocks that beat market expectations but still fall over and the ones that disappoint on the down side are really punished," he said.

Qantas chief executive Geoff Dixon today said forward bookings could fall by up to 15-20 per cent if there is a war in Iraq.

Bookings had already fallen by around 6 per cent, he said.

The airline reported a net profit of $352.5 million for the half year ended December 31, 2002, up 129.6 per cent and at the top end of analysts' expectations.

4:05 AEDT

Qantas shares closed at $3.36 down 44c or 11.58%


Qantas to Reduce Flights, Force Vacations as Bookings Slow; Shares Tumbles
By Margreet Dietz, with reporting by Andrew Harrison

Sydney, Feb. 20 (Bloomberg) -- Qantas Airways Ltd., Australia's largest airline, will cut flights, force workers to take accumulated leave and freeze some spending to meet its full-year profit forecast because bookings have slowed amid concern about a war in Iraq.

Qantas shares fell as much as 6.3 percent on the outlook. First- half earnings more than doubled to a record A$352.5 million ($208 million), or 21 cents per share from A$153.5 million, or 11 cents a year earlier, Qantas said in a statement.

The forced vacation between now and June 30 is equivalent to eliminating 1,500 jobs, Qantas Chief Executive Geoff Dixon said in a statement. The carrier has about 33,000 workers. Discretionary spending will be frozen and domestic and international flights pared back.

"The next year will be tougher for Qantas,'' said Brian Ingham, who holds Qantas shares for the A$75 million he manages at IMB Matrix Asset Management Ltd. The outlook "depends to a large degree on international developments, such as a possible war in Iraq.''

"Bookings for the next 16 weeks have slowed considerably,'' Dixon said. "If tensions continue around Iraq and terrorism, bookings could further deteriorate. In such an environment, our profit target would certainly become more difficult to achieve.''

First-half profit beat the A$343 million average estimate of seven analysts surveyed by Bloomberg News. Forecasts ranged from A$302 million to A$401 million.

Rivals' Woes

Qantas earnings rose as many European and U.S. rivals report losses or file for bankruptcy. The Sydney-based airline is also benefiting from the collapse of its main local rival, Ansett Holdings Ltd., in September 2001. Qantas's dominance of the local market should help it cope with any drop in overseas demand in the event of a war in Iraq, analysts have said.

Qantas, which is awaiting regulatory approval to buy a stake in rival Air New Zealand Ltd., posted earnings before interest and tax of A$264 million on its international routes, compared with a A$15.5 million loss a year earlier, when overseas travel slumped after the Sept. 11 terrorist attacks.

On domestic routes, earnings before interest and tax fell 1.7 percent to A$198 million.

Qantas probably gained market share on U.S. routes because of UAL Corp. United Airlines' financial difficulties, culminating in the airline's bankruptcy in December, analysts said.

The collapse of rival Ansett left Qantas as Australia's only international airline and probably helped it increase its share on routes to Japan, New Zealand and Europe.

Ansett's failure also helped Qantas to increase its Australian market share to 75 percent from half. Virgin Blue Airlines Pty, which started operations in August 2000, has most of the remainder.

Qantas is trying to capture some of the international low-fare leisure market, with all-economy unit Australian Airlines.

Australian Airlines added A$4.4 million to Qantas's earnings before interest since it started operations in October.