Qantas tanks in Australia

Qantas cuts back flights in face of falling demand and confidence

Qantas' domestic capacity growth will be up to 1.5 per cent lower. Photo: Glenn Hunt

the Age,

18 April, 2016

Qantas shares have plunged after the airline and its low-cost spin-off, Jetstar, said it was cutting back planned flights on domestic routes in response to reduced demand from Australians worried about the economy and the upcoming election. 

Qantas shares tumbled 14 per cent to be at $3.49 at midday, AEST, before recovering slightly to $3.58 at 12.30pm - down 11.8 per cent. 

The airline said it had revised plans to increase seat capacity in April, May and June because customers were flying less. 

"Some softness in demand, related to the upcoming federal election and a recent drop in consumer confidence in Australia, began to emerge over the peak Easter and school holiday period in late March and continued to be seen in forward bookings," Qantas said in an update to stock exchange.

Qantas said it would boost domestic capacity between 0.5 per cent and 1 per cent during that period, instead of about 2 per cent as originally planned - a year-on-year drop - and that it could reduce it even more.

Cutting capacity growth would defend Qantas' revenue-per-available-seat kilometre (RASK), an important measure of an airline's efficiency and profitability, Qantas said.

Qantas shares dipped on news it will be cutting back flights. Photo: Bloomberg

Total Qantas group RASK for the financial year to date was lower compared with the year-earlier period, with lower international results negating strengthened domestic results, while total revenue per seat edged up 0.8 per cent on last year.

Combined capacity would increase by 5 per cent to 6 per cent in the second half, driven by growth from Jetstar's international B787 Dreamliner and increased use of Qantas International's fleet.

Deutsche Bank said on Monday that domestic airfares were showing signs of softness due to reduced demand over the next three months, but airlines' earnings were being protected by lower fuel prices.

Qantas said it had revised plans to increase seat capacity in April, May and June because customers were flying less. Photo: Supplied

Qantas economy domestic flights booked for April had fallen about 8 per cent and flights for May had fallen about 15 per cent compared to last year, Deutsche Bank said in a note to clients, which came after nine months of strong fare growth.

Virgin Australia bucked the growth trend over that period, especially in economy class, with domestic and international fares growing at less than the rate of general inflation.

Virgin's business class fares, however, have been growing at more than inflation, which Deutsche Bank analyst Cameron McDonald said likely highlighted the "weakness in the underlying domestic demand environment and the company's shift away from the resources sector."  

Qantas cutbacks

“I so wish they wouldd acknowledge that this is a natural consequence of the current distribution of energy sources. Rather than making it seem like Santa doesn't love us anymore”

---Hecate Questo

Australia's Qantas Is Cutting 5,000 Jobs

Business Insider,

10 September, 2012

Qantas just posted as $252 million half-year before-tax loss, and confirmed it will cut 5000 jobs.

CEO Alan Joyce said the result was unacceptable, according to a statement, and action would be taken as a response. The result is at the upper end of previous guidance.

“We are facing some of the toughest conditions Qantas has ever seen,” Joyce said.

“The Australian domestic aviation market has been distorted by current Australian aviation policy, which allows Virgin Australia to be majority-owned by three foreign government-backed airlines and yet retain access to Australian bilateral flying rights.”

As part of a now-accelerated plan to produce $2 billion in savings, the airline confirmed earlier speculation it would cut 5000 full-time positions over the next three years. There will also be a wage freeze across the entire Qantas group.

“Qantas has been undertaking its biggest ever transformation over the past four years, cutting comparable unit costs by 19 per cent over four years, but this is not enough for the circumstances we face now,” said Joyce.

Here are the key figure:

Underlying PBT loss: $252 million

Statutory Loss After Tax: $235 million

Yield excluding FX down 3%

Revenue: $7.9 billion, down 4%

Underlying fuel costs excluding FX impact: $2.3 billion, up 3%

Comparable unit costs down 2%

Liquidity: $3 billion

The Lucky Country runs out of luck

Australia's iconic brand Holden is due to cease production and Qantas expects to record a $250-300 million pre-tax loss and sack 1,000 workers.

Holden tipped to pull out of Aust from 2016

General Motors is set to shut its government-supported Australian car making operation in 2016, potentially putting an end to the 50,000-job vehicle assembly industry, local media reports said.

NZ Herald,

6 December, 2013

The ABC said GM's Holden was in discussions with the government over its future but that unnamed senior government ministers had told the broadcaster that it would cease production as early as 2016.

Industry Minister Ian Macfarlane and Opposition Industry spokesman Kim Carr issued statements denying a decision has been made. Macfarlane met with Holden on Thursday and said talks were continuing, the ABC said.

The speculation came as Australia's productivity commission continued an inquiry into the future of the car industry that is expected to determine Holden's future after key competitor, Ford, announced in May its plan to stop its Australian manufacturing by 2016 with the loss of 1200 jobs.

If the commission recommends against ongoing funding, Holden is likely to follow Ford and close its assembly facilities, the ABC said. A final report is due on March 31.

Holden said its discussions with the Government were continuing, and it did not respond to speculation. Industry Minister Ian Macfarlane said he has spoken to Holden and they have denied the reports.

Research released last month suggested that Holden's closure would cost the South Australian economy $1.24 billion and 13,200 jobs alone.

Australian unemployment is currently running at 5.7 per cent.

The Federal Chamber of Automotive Industries says the industry directly employs more than 45,000 people across the country.

The Australian Manufacturing Workers Union says Toyota would be likely to follow suit, meaning the end of the Australian automotive industry.

In that proves to be the case, up to 50,000 jobs could be lost across the country, with second and-third tier suppliers also forced to close their operations, the ABC said.

Ford's exit had long been expected after 20 years of declining fortunes for the industry. Early this year, Ford Australia president Bob Graziano blamed the high Australian dollar, rising costs and "one of the most competitive and crowded automotive markets in the world" for the decision to end local production. He said costs in Australia were twice those of Europe and four times those of Asia. Toyota - the only other Australian vehicle manufacturer - is widely expected to close its lines within the next few years.

What is behind the Qantas-Virgin row?

Qantas and Virgin Australia are currently engaged in a public battle over who is better off under the existing regulations that govern airlines in Australia, but what is the context to the dispute?

ABC,
9 December, 2013



A recent capital raising from Virgin, and the announcement by Qantas that it expects to record a $250-300 million pre-tax loss and sack 1,000 workers has brought discussions over the future of the national carrier to the fore.


Central to the issue are two pieces of legislation - the Qantas Sale Act and the Air Navigation Act.


The Qantas Sale Act was enacted in 1992 to ensure the national carrier retained majority Australian ownership after privatisation.


Under the act, foreign ownership in the flying kangaroo is capped at 49 per cent, and single foreign investors cannot own more than 25 per cent of the company.



There are further restrictions on ownership by overseas airlines - limiting total ownership by foreign airlines to 35 per cent, and in 2011 the act was amended to require Qantas base its principal operation centre in Australia.


The Air Navigation Act requires carriers to keep an Australian majority in order to gain access to routes in and out of Australia.


Qantas has called for changes to the Qantas Sale Act, saying it leaves them at a commercial disadvantage compared to Virgin Australia.


Commercial disadvantage?


Qantas is claiming that Virgin, which is partially owned by three foreign airlines, is being run at a loss to drive Qantas out of business - citing Virgin's recent $350 million capital raising that is underwritten by the foreign owners.


Qantas CEO Alan Joyce has also questioned whether the investment, which will take the trio's stake to almost 70 per cent, complies with the Air Navigation Act.


Virgin last year split its domestic and international operations, allowing it to maintain Australian ownership of its international business, while its domestic offering is now predominantly foreign owned.


This split allows Virgin to adhere to the Air Navigation Act, but Qantas is claiming the separation is a sham.


The Qantas Sale Act prevents the national carrier from achieving a similar separation.


In response Virgin has hit back, claiming Qantas receives preferential treatment from the Federal Government, such of comfort letters to its ratings agencies.


Qantas has flagged several other ways the Federal Government could assist it, including a Commonwealth guarantee on its debt, and Virgin CEO John Borghetti says any assistance should be extended to Virgin.


Mr Borghetti has called for the end of the Qantas Sale Act, saying the airline is happy to compete on a level playing field.

Australian aviation problems

Australia Awash With Flights, Hurting Airlines, Qantas Says

Australia’s domestic aviation market is awash with flights, benefiting passengers rather than airlines, said the head of Qantas Airways Ltd.’s (QAN) local business.

Businessweek,

24 November, 2012

“There’s a lot of capacity sloshing round the Australian marketplace overall,” Lyell Strambi, chief executive officer of Qantas Domestic, said at a media briefing at Sydney airport today. “Ultimately the winners are the customers.”

Flight capacity in the domestic market in the December half is running about 12 percent more than its level last year, whittling profitability for carriers aiming to match the supply of seats to demand, Russell Shaw, an analyst at Macquarie Group Ltd., said by phone Nov. 7. A measure of business-class ticket prices has fallen 40 percent in the past year to two-decade lows as Virgin Australia Holdings Ltd. (VAH) stepped up competition with Sydney-based Qantas, Australia’s largest carrier.

There had been “some adjustments in capacity” in the last few months without any significant reduction in growth, John Borghetti, Virgin’s chief executive officer, said on a media call Nov. 20. “Competition is certainly very aggressive now and competition will always be aggressive,” he said.

A move announced today by Qantas to switch all services that fly between the Western Australian capital, Perth, and Sydney and Melbourne, to Airbus SAS A330s from May won’t significantly affect domestic capacity, Strambi said.

The bulk of additional seats that Virgin is adding come from switching to wide-body jets like the A330 on routes between Australia’s east and west coasts, Borghetti said last week. Qantas’s A330s will replace Boeing Co. 767s on east-west routes, which will be moved to the busier east-coast network, Strambi said today.

Virgin plans to buy a controlling stake in Tiger Airways Holdings Ltd. (TGR)’s local unit and to take over Skywest Airlines Ltd., the company announced Oct. 30, in a deal that would raise its share of the Australian domestic market to about 35 percent from 30 percent at the moment.

More cutbacks at Qantas

Qantas to cut 263 Avalon engineers

HUNDREDS of maintenance engineers at Qantas' Avalon base were downcast but not surprised to learn 263 would lose their jobs.

the Age,

9 November, 2012

The airline has announced it will cut 500 jobs from Sydney and Avalon airports as it moves more heavy maintenance work to Brisbane, where about 100 jobs will be created.

The Victorian cuts target engineers who have been reconfiguring nine of Qantas' 18 Boeing 747-400 aircraft, with the last of the jumbos to be updated by the end of the month.

Australian Workers Union Victorian secretary Cesar Melhem condemned Qantas' decision. ''I am disgusted with the approach Qantas have taken,'' Mr Melhem said. ''They may as well close the place down because we are only going to be left with half the workforce.''

Aircraft maintenance engineer William Brinsmead lost his job following the collapse of Ansett in 2001, and was upset to learn yesterday that he could be made redundant. He said the airline industry had boiled down to a ''survival of the fittest''.

''Since 9/11 there have been 50 airlines around the world that have gone into bankruptcy, it's a business that requires high overheads with manpower and the cost of aviation fuel,'' he said.

The softly spoken worker, 65, has been a contractor for Qantas for more than six years, and said he has no intention of trying to transfer to a new job up in Brisbane.

He said his skills were not transferable to other industries and he hoped to find more contract work and then retire.

Another contractor, who did not want to be named, said the axe that had been swinging over their heads for six months had finally dropped.

Mr Melhem said Qantas had consulted neither the unions nor the workforce. ''This one just came out of the blue in a typical Qantas way of doing business in this country.''

Mr Melhem said workers had been optimistic about the viability of the heavy maintenance base after the recent announcement that Avalon would become the state's second international airport.

He met workers just six months ago and told them on behalf of Qantas that they were likely to have a job for the next two years.

In May, when Qantas announced the closure of its heavy-maintenance base at Tullamarine with the loss of 422 jobs, Premier Ted Baillieu told Parliament the government's efforts had been ''critical to ensuring that Avalon remains as a heavy-maintenance facility''.

Yesterday, shadow minister for employment Tim Pallas said ''the fact these workers are out of jobs is a clear sign of how disinterested this government is in rolling their sleeves up and doing something''.

But Mr Baillieu said the state government had done all it could. ''Qantas have made it very clear to us … that we could not have done more to retain that work,'' he said.

Mr Baillieu said Qantas had already flagged more job cuts once the work on the 747s was complete.

''We said that there would be 500 continuing jobs and that was the case. But there was always the issue about the reconfiguration program concluding,'' Mr Baillieu said.

Steve Purvinas, federal secretary of the Australian Licensed Aircraft Engineers Association, said those who lost their jobs would struggle to adapt.

''They have qualifications that are not easily transportable into any other industries,'' Mr Purvinas said. ''They can't sit a one-week course and become household electricians. These are aircraft people.''

Qantas credit downgrade

Qantas Cut to Lowest Investment Grade by S&P on Losses

Qantas Airways Ltd., the Australian carrier that yesterday struck a 10-year alliance with Emirates to turn around losses on international routes, had its credit rating cut to the lowest investment grade by Standard & Poor’s.

Businessweek,

7 September, 2012

The airline’s debt grade was lowered by one level to BBB- with a stable outlook, according to an e-mailed statement from the ratings company.

“Qantas’s business risk profile has weakened because of the structural pressures affecting the airline’s international business,” Melbourne-based analyst May Zhong said in the S&P statement. “Persistent pressures have eroded Qantas’s market share and inflicted losses on the airline’s international operations in the past few years.”

The carrier yesterday announced a revenue and cost-sharing tie-up with Emirates, the world’s largest airline by international passenger traffic. Sydney-based Qantas lost A$450 million ($465 million) on international routes in the year to June 30, dragging the company to its first annual loss in at least 17 years.

It may take some time for the benefits of the Emirates partnership to be seen, and Qantas still faces increased competition on Asian routes from carriers with lower cost bases, S&P said in its statement.

‘Underlying Strengths’

Qantas has “significant underlying strengths,” the airline said in a statement responding to the downgrade, pointing to its free cash flow and dominant share of the Australian market.

“It’s a very tough industry,” said Brendon Cooper, head of credit strategy at Westpac Banking Corp. (WBC) in Singapore. “You’ve got private-sector airlines competing against ones with other means of support.”

Still, the deal with the Gulf carrier is a “positive” for Qantas and may allow it to conserve more cash, Cooper said. Emirates is owned by the government of Dubai.

Credit-default swaps on Qantas closed at 400 basis points yesterday, up from a 2012 low of 270 basis points reached in March, according to data provider CMA. That’s the highest level among the 25 companies in Australia’s benchmark bond risk gauge.

Qantas has A$3.2 billion of bonds and loans maturing by 2021, according to data compiled by Bloomberg. It holds a Baa3 grade from Moody’s Investors Service, also the lowest investment grade ranking. The carrier is one of just two airlines worldwide, with Southwest Airlines Co., to be judged investment grade by two separate rating companies.

The airline’s shares rose 5 percent to A$1.26 in Sydney trading today before the downgrade was announced, paring this year’s loss to 14 percent.

Spending Cuts

Qantas has cut its forecast of capital spending by pushing out orders of Airbus SAS A380s and canceling a delayed order of 35 Boeing Co. (BA) 787 Dreamliners. Capital spending was A$2.13 billion in the year through June, according to data compiled by Bloomberg, and the company forecasts A$1.9 billion to be spent next year and again in 2014.

Qantas said Aug. 24 it would get $433 million from Boeing, including more than $300 million in compensation payments, as a result of delays.

Alan Joyce, Qantas’s chief executive officer, said yesterday the benefits of the Emirates deal to its European operations and an ability to expand its Asian network should be seen positively by rating companies.

“That’s extremely positive news for the rating agencies and I think they’ll see it in that light,” he told a media conference

Other aviation news -

Lufthansa flights hit again by cabin crew strike

Lufthansa Drops 1,000 Flights Amid Biggest Cabin Crew Strike

Kuwait Airways likely to report $283 million loss

Kenya Airways staff cuts to hurt profit

Airlines under pressure

World's legacy airlines come under pressure

"Qantas has been through an exceptional period in its history over the past 12 months." When Alan Joyce, the Australian airlines's chief executive uttered the sober statement last week, there were few in the global aviation industry who didn't feel a degree of empathy

The Telegraph,

26 August, 2012

The national flag carrier admitted it had racked up its first annual loss since it was privatised in 1995 but Mr Joyce is not alone as he flies through dark skies. He doesn't have to cast his eye far before he finds a competitor in similarly turbulent times.

British Airways-owner IAG is sitting on half-year losses of €390m (£309m) amid "deep and structural" problems at its Spanish airline Iberia. Air France is shedding 1500 jobs. UK regional airline Flybe has been forced to issue yet another profit warning, its fifth since its flotation in 2010. Even Ryanair, the seemingly indomitable low cost carrier, saw a 28pc drop in pre-tax profits in the first quarter.

You don't have to look far to see how the winds of change are causing even the sturdiest of airlines to endure a bumpy flight. Ryanair boss Michael O'Leary's third bid for Irish rival Aer Lingus in June took the City unaware but some of his logic behind the €649m tilt is perhaps less of a shock, according to analysts.

Talk on the flight deck is of consolidation as prolonged economic turmoil in key markets and sky-high jet fuel bills threaten a shake-up of the industry. In Ryanair's bid document for Aer Lingus, Mr O'Leary talks of the European aviation market "inexorably" consolidating into five dominant airline groups: IAG, Air France-KLM, Lufthansa, easyJet and Ryanair.

While Mr O'Leary is used to many of his more unusual schemes - such as "pay per pee toilets" and standing room-only planes - being laughed off, this is one idea that many in the aviation industry are taking deadly seriously.

Andrew Lobbenberg, head of European transport research at HSBC, has highlighted five of the smaller European carriers, which he believes will deliver the industry consolidation anticipated, whether they become an acquisition target or whether it is through failure. He has highlighted the ones to watch as Finnair, Spain's Vueling, Flybe, Scandinavian carrier SAS and Air Berlin.

However, the battle for the skies is taking place at every level of the industry and it's not only the minnows that that are jostling for air space. Virgin Atlantic last week unveiled plans for its first short-haul flights between London and Manchester as Sir Richard Branson's carrier is forced to up its game following the takeover of bmi by BA.

The entrepreneur does not want to rely upon feeder flights from his rival, BA, to supply passengers to his long-haul network – a role that was previously performed by bmi. Sir Richard also plans to launch London to Scotland routes as he takes on the UK's legacy carrier.

On a global level too, younger airlines such as Emirates, Qatar Airways and Etihad are challenging the legacy carriers on territory they have ruled for decades.

"There's no doubt that the big low cost carriers, Ryanair and easyJet, are doing and will continue to do very well," says John Strickland of JLS Consulting. "Ryanair had a sharp fall in [Q1] profits but they are still highly profitable even though their profits are down."

However, even the low cost carriers are having to pick their battles wisely, according to Donal O'Neill, analyst at Goodbody.

After an extended period of growth and aggressive route expansion, the low cost carriers are now taming their aircraft orders and concentrating on improving margins and load factors – the number of occupied seats on each flight.

On the surface, the outlook for the legacy carriers such as IAG, Air France and Lufthansa appears pretty bleak as they struggle with heavy losses and face growing competition from the likes of Virgin and Emirates. Despite this, some analysts feel they now have an opportunity.

Tempered growth at easyJet and Ryanair will take the pressure off and allow them to force through much-needed restructuring to their short-haul operations. But those expecting a period of frenzied mergers and acquisitions in the airline industry may be disappointed, says Mr O'Neill.

One inevitability, though, is more airline failures. Hungary's Malev and Spanair are among those that have gone to the wall, unable to overcome high fuel bills and consumer spending squeezes. Analysts believe it is now only a matter of time before another domino topples

Qantas

Australia's Qantas posts huge loss

Australian carrier, Qantas, has posted its first annual loss since privatisation in 1995 and cancelled orders for 35 Boeing jets as high fuel costs and industrial action hammered its bottom line. The airline announced a net loss of $256m (244 million Australian dollar), a half-billion-dollar reverse from a net profit of AU$250m in the previous 12 months. Andrew Thomas reports from Sydney.

Aviation woes

UK airlines cut costs along with safety

Pilots of airlines operating in Britain have been forced to make 28 emergency landings due to fuel shortage this year raising worries that flights’ safety is being sacrificed to cut operating costs..

Press TV,

21 August, 2012

According to figures published by British Civil Aviation Authority, the Virgin Atlantic with two forced landings at London Stansted Airport in January and the low-cost Irish airline Ryanair with three emergency landings in Spain were among the involved companies.

The forced landings due to fuel shortage come as the passenger jets of airlines operating in Britain should carry enough fuel to complete their flights and reserves to take them to an alternative airport where they should be able to circle for 30 minutes before gaining landing permission.

"There is pressure on pilots by airlines to carry minimum fuel because it costs money to carry the extra weight, and that is quite significant over a year,” a retired pilot told the Exaro website.

Safety chiefs at the British Airline Pilots Association (BALPA) say the airlines are carrying the minimum reserve fuel possible to cut costs but they fail to consider the combined impact of airport traffic and bad weather conditions leaving airliners running low on fuel.

“The way in which aircraft are being developed in becoming more fuel efficient, there is less need for fuel,” said BALPA’s head of safety David Reynolds.

“However the problem comes when there are delays. The infrastructure in the South East is creaking … The very bad weather that we had in December caused pandemonium in the south-east of England. Aircraft were arriving and finding that they suddenly had nowhere to land because the airfield had closed or everybody else had gone there,” he added.

Embattled Qantas chief forgoes bonus and pay rise

Google,

20 August, 2012

SYDNEY — The embattled chief of Qantas Airways Alan Joyce said Monday he would forgo any bonus or pay rise, joining a growing list of high-profile top executives at Australian companies who are doing the same.

Qantas is struggling with soaring fuel costs and worsening global conditions and has indicated it will this week post its first annual loss since privatisation in 1995.

In a statement to the stockmarket in June, the airline said it expected underlying profit before tax -- its preferred indicator -- to be Aus$50-100 million (US$52-104 million) in the year to June 30.

This compares with Aus$552 million in the previous year.

For article GO HERE

Qantas

Qantas profits dive, more jobs, services to go

The world’s oldest continuously flying airline has had its fair share of turbulence but recent events have hit the company hard

Press TV,

21 June, 2012

Qantas announced in early June of a 90 per cent drop in profits for the financial year, ranging from 50 to 100 million dollars, well down from the 550 million dollar profit recorded last financial year.

Management blame the downturn on the Eurozone crisis, rising fuel bills and most prominently on losses on international routes, where it’s expected that $450 million dollars was lost, double last year.

Qantas’ former Chief Economist, Tony Webber says the airline’s international arm is suffering but proposed cuts won’t impact overall services.

The International routes the airline flies is becoming increasingly competitive, particularly from middle-eastern groups such as Emirates and Etihad and Singapore Airlines’ budget carrier Scoot recently launched flights between Singapore and Sydney. Tony Webber says there’s now an excess of supply in the market.

Several industrial relations disputes have also hit the company, including the shock decision by management to ground the entire airline in late October 2011 over wage and service disputes with staff.

The Transport Workers Union is in arbitration with Qantas over the continuing disputes.

Fair Work Australia is also investigating potential employment breaches when Qantas imported Thai stewardesses to work on domestic routes on unfair pay.

Since the profit announcement, Qantas’ share price has dived by a third and the airline is being undervalued. CEO Alan Joyce recently admitted that defense strategies to fend off potential hostile takeover bids have been set up, though no formal offers have been received.

For video GO HERE

Qantas hits rock bottom

Qantas shares hit rock bottom

Qantas shares have slumped below AUD$1.00 (NZD$1.29) capping a horror week in which AUD$1.1 billion was wiped off the airline's market value.

TVNZ,

8 June, 2012

The dramatic slide follows the airline's shock profit warning on Tuesday, caused by the drastic deterioration in the performance of its international business.

Before that warning, Qantas shares were trading at AUD$1.42, but have since lost ground each day, setting new records in the process, to end Friday's session at AUD0.97 cents.

It's a far cry from the AUD$1.90 Qantas shares were worth 12 months ago, and the AUD$5.91 peak they hit in October 2007.

Qantas expects its international business to post a loss of AUD$450 million in the 2011/12 financial year, more than double the AUD$216 million loss in the prior year.

The overall company's full year profit is forecast be between AUD$50 million and AUD$100 million, down by as much as 91% from the AUD$552 million achieved in the previous year.

Credit ratings agency Standard & Poor's on Friday reacted to the airline's renewed outlook, placing the company on credit watch with the potential of a downgrade.

If the airline's international business does not improve earnings in a reasonable timeframe, Qantas' risk profile would weaken, Standard & Poor's said.

"In our view, Qantas' international operations are a key factor to the group's long term competitiveness," S&P credit analyst May Zhong said in a statement.

If S&P were to downgrade the airline's credit rating, it would likely be by one notch from its current BBB rating, the agency said.

Qantas recently announced plans to split its domestic and international businesses into separate companies, which fuelled speculation one may be sold off.

The drastic drop in the value of Qantas will only add to such speculation.

Qantas

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.

NZ Herald,

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.