QANTAS SLASHES PROFIT FORECAST
26 November 2008
MATHEW MURPHY, AVIATION REPORTER
A BIG slump in international travel has forced Qantas to slash its profit forecast by almost 65 per cent compared with last year's record result and make further cuts to its capacity.
But despite a 46 per cent decline in the spot price of Singapore jet fuel, Qantas says it has no immediate plans to further reduce its fuel surcharge other than to say it is "constantly under review".
Qantas chief executive Geoff Dixon said the airline's profit before tax for the financial year would be about $500million, broadly in line with analysts' forecasts but well below the $751million figure it predicted in August. It is also almost a third of the $1.4billion pre-tax profit Qantas recorded last financial year.
Qantas' poor international traffic is the main factor behind the profit downgrade. The latest statistics for Qantas' long-haul business showed a 7.2 per cent drop in international passengers for the year to September compared with the same period last year. Those figures prompted Qantas to offer an aggressive two-for-one ticket sales promotion on international flights earlier this month.
"We are in unpredictable times and the international business market, in particular, has slowed," Mr Dixon said.
Qantas, which mainly services corporate travellers, was outperformed by its budget carrier Jetstar, which put more than 23per cent more seats into its international markets in the year to September and carried 36.5 per cent more international passengers.
Mr Dixon said Qantas would reduce its capacity by the equivalent of grounding 10 aircraft. It no longer plans to lease two A330-200 aircraft, will halt all planned growth in Qantas and Jetstar's domestic markets and will change the flying patterns of 10 other aircraft until mid-2010, indicating it believes the fall in demand will continue throughout 2009.
London to Los Angeles, Perth to Jakarta and Perth to Bali have all been scaled back.
Mr Dixon said there were no plans to increase the 1500 job cuts it announced in July. "We will, however, be seeking further efficiencies by implementing an accelerated leave program."
Jetstar chief executive Alan Joyce, who succeeds Mr Dixon at Qantas on Friday, said while the price of fuel had eased, it had been offset by a reduction in demand since September. Qantas' fuel bill for 2007-08 hit $3.6 billion but the airline had estimated this year's bill could be $2billion higher as fuel hit its peak mid-year. "Where we can pass those savings on we will," Mr Joyce said. "But you have to remember our fuel bill for 2008-09 will still be $750million higher than last year.
"The full-service, long-haul carriers are being affected by the financial crisis more than other airlines. You've seen British Airways talk about their profitability drop from nearly 900 million ($A2.1billion) to break even this year. Emirates has seen profitability drop by 88 per cent. We are no different in the long-haul business, except we do have a low-cost carrier, a regional operation, a domestic operation and a very good frequent flyer business which has helped the group sustain profitability when everyone else is taking a bigger hit," Mr Joyce said.
Shaw Stockbroking's aviation analyst Brent Mitchell said he had expected a profit of about $470million this year. He said a weak Australian dollar and a fall in consumer confidence would affect international demand for all airlines.
Qantas shares fell 7 to $2.24.
©008 Copyright John Fairfax Holdings Limited. www.theage.com.au
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