Qantas Flags Profit Drop On International Losses

 

Qantas Flags Profit Drop On International Losses

Qantas Flags Profit Drop On International Losses

Australia’s Qantas Airways warned on Tuesday its underlying profit before tax will fall by up to 90 percent due to deeper losses at its international operations, weak travel demand and high fuel costs, sending its shares to a record low.

Qantas, which plans to split its profitable domestic and loss-making international operations from next month, said underlying profit before tax for 2011/12 was seen at AUD$50 million (USD$48.6 million) to AUD$100 million.

That compared with AUD$552 million a year ago. The warning sent shares of Qantas down by 18.3 percent in early trading.

Qantas’ warning underlines the global aviation sector’s struggles as high oil prices and sagging demand due to the European economic crisis take their toll.

The International Air Transport Association has downgraded its forecast for airline profits in 2012 to USD$3 billion from USD$3.5 billion, and has said that a further economic downturn could see a net loss for the sector.

Qantas said its international business was seen posting a loss in earnings before interest and tax (EBIT) of more than AUD$450 million in 2011/12, compared with a AUD$216 million loss a year ago. The domestic operations EBIT was seen at over AUD$600 million.

“We are attacking costs and allocating aircraft and capital efficiently. Over AUD$300 million in annual benefits have been identified from the changes we are making,” said chief executive Alan Joyce, who aims to return the international business to profit by 2014.

The airline said with a cash balance of more than AUD$3 billion, an undrawn standby facility of A$300 million, and the flexibility to cut or raise capital investment it remains in a strong funding position.

(Reuters)



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