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Qantas to spend $5bn on planes

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Old 25th Oct 2004, 21:06
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Qantas to spend $5bn on planes

Tues "The Australian"

Qantas to spend $5bn on planes
Steve Creedy
October 26, 2004

QANTAS plans to fund a potential $US4 billion ($5.3 billion) order for additional wide-body aircraft internally, with executives seeing no need to raise more money from shareholders.

The airline is looking at buying about 20 new aircraft to cater for additional growth and gradually replace its Boeing 747 fleet from about 2008.
The new acquisitions would be in addition to an $18 billion "re-fleeting" program already under way.

Executives have looked at the Boeing 777-300ER and the Airbus A340-600 but are not ruling out the 777-200LR or the proposed A350.

They expect to be in a position to put a plan to the airline's board by May.

"One of the key commandments of the business and continuing to be, is that we want to retain an investment-grade credit rating," chief financial officer Peter Gregg said yesterday.

"And that means we don't want the gearing to go any higher than that 60 per cent debt to total equity ... we would want to fund from internal cash flows, we wouldn't want to raise any more equity."

Mr Gregg's comments came as traffic on Qantas continued to rebound strongly during August, although the rises were outstripped by increases in capacity that saw a fall in international and domestic load factors - the percentage of seats held by paying passengers.

A solid 13 per cent rise in total domestic traffic failed to match a 16.5 increase in capacity - the number of available seats - forcing down load factors by 2.5 points to 78.6 per cent. The year-to-date domestic load factor fell by 2.8 points to 79.9 per cent.

The arrival of Jetstar and competition from Virgin Blue also continued to affect domestic yield, which was down 8.3 per cent for the financial year compared with the same period last year.

August traffic on Qantas and Australian Airlines international routes was up 9.8 per cent on a year ago, but a 19.2 per cent rise in capacity saw the international load factor fall 6.1 points to 72 per cent.

The news was brighter for international yield, which was up 4.5 per cent on last year after exchange rates were excluded.

But there were also warnings to airlines in the Asia-Pacific region that capacity growth should not be allowed to get too out of hand.

Releasing its September traffic figures, the Association of Asia Pacific Airlines said revenue traffic remained robust but growth was not as spectacular as in the past.

"With increasing fuel prices the break-even load factor is going up and capacity must be more closely aligned with traffic growth in order to ensure a healthy gap between the break-even and revenue load factors," said AAPA director-general Richard Stirland.

"We are fortunate that so far traffic growth does not appear to have been adversely affected by fuel charges or concern about the future direction of regional economies, but these are real dangers."

AAPA's preliminary September figures showed traffic was 8.4 per cent up on a year ago, while capacity increased 10.2 per cent. This produced a 1.2 point fall in load factor to 73.3 per cent. Freight traffic grew by 13.4 per cent.

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