Qantas
forecasts massive 90pc profit fall
Embattled
Australian flag carrier Qantas has warned today its full year profit
could dive by up to 90 per cent, with its international arm posting
steep losses.
5
June, 2012
The
airline said it expects underlying profit before tax - its preferred
measure of financial performance - in the year to June 30 to be
A$50-100 million, (NZ$64m-$NZ128m) compared with A$552 million in the
previous year.
In
a statement to the stock market, the carrier blamed a deterioration
in global operating conditions driven by the European economic crisis
and its highest ever jet fuel bill.
A
high Australian dollar and a bitter battle with unions over wages and
conditions that saw chief executive Alan Joyce ground the entire
fleet for 48 hours in October also cost the airline dearly.
Qantas
shares plunged more than 15 per cent and were trading at A$1.20 early
in the session.
Qantas's
international business is expected to post a loss of more than A$450
million, more than double the loss of A$216 million in the last
financial year.
In
contrast, its far healthier domestic unit and low-cost offshoot
Jetstar are expected to book a combined profit exceeding Aus$600
million.
"We
remain focused on returning Qantas international to profitability in
2014 and for Qantas international and domestic combined to exceed
their cost of capital on a sustainable basis within five years of
August 2011," said Joyce.
In
a bid to halt the dramatic slide in profits, Joyce last month
announced Qantas will split its international arm from its domestic
operations.
Each
of the two entities, currently combined as Qantas Airways, will run
as separate businesses from July with their own chief executives and
reporting of financial results.
The
move came just days after Joyce said 500 jobs would be axed in its
heavy maintenance and engineering operations.
"We
have taken decisive action to mitigate losses in Qantas international
by withdrawing from loss-making routes, reducing capital investment,
and transforming Qantas engineering," Joyce said Tuesday.
"The
introduction of a new Qantas Group structure with dedicated CEOs for
Qantas international and Qantas domestic will bring further rigour to
our business."
Joyce
said more than Aus$300 million in annual benefits would flow from the
changes being made.
He
added that the carrier had a cash balance of more than Aus$3 billion
and "remains in a strong funding position".
"The
group has funding in place for the majority of its 2012/13 aircraft
deliveries and intends to fund the remainder of its future capital
commitments from operating cashflow, cash reserves and available
debt," he said.
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