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Qantas slashes profit expectations

written by australianaviation.com.au | June 5, 2012
Qantas says it will barely break even this financial year. (Rob Finlayson)

Qantas says that it expects its underlying profit before tax for the financial year ending June 30 to come in at $50-$100 million as a result of lower yields and higher fuel costs.

Qantas said that it expects yield during the six months to June 30 to grow by 0.5-1.0 per cent, compared with previous estimates of 1.5-2.5 per cent, while underlying fuel costs are expected to rise by $700 million to $4.4 billion.

Qantas says that it is expecting Qantas International’s earnings before interest and tax (EBIT) loss for the year to blow out to $450 million, compared to a $216 million loss the year prior.

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“Structural issues in the business have been compounded by the impact of global economic factors – including increased fuel costs, the high Australian dollar and weakness in the UK and Europe market – as well as the $100 million one-off cost of industrial action,” the company said.

By comparison, it expects its domestic Qantas and Jetstar businesses to deliver positive EBIT of over $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 CEO Alan Joyce.

The announcement had an immediate effect on Qantas shares, which slumped by 16 per cent, taking it for the first time ever to below $1.20 per share on June 5.

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Qantas slashes profit expectations Comment

  • Michael Anderson

    says:

    It appears part of Qantas’s problem are it’s long sectors.

    Apparently optimal length of a sector for a 744 or A380 is around 10-11 hours (full load of passengers & freight).

    The extra 3 to 4 hours seem VERy expensive to operate for at lest 3 reasons:-

    1) extra fuel must be carried

    2) less passengers esp westbound from eg. LAX & DFW

    3) less freight can be carried

    Rather than cut AKL/LAX completely maybe they should hub over AKL, or better still NAN or another south Pacific port, just not US territory such as HNL or PPG, as then passengers subject to US customs & immigration & then final sector is US domestic.

    Qantas roughly operates a maximum of 5 flights a day nonstop to mainland USA (4 to LAX & 1 to DFW).

    QF may have to discontiue some of these (easy to cut 1 SYD/LAX/SYD per day without disruption passengers).

    Those on cheap tickets can go via BNE or even MEL (or AKL, NAN, Samoa, Tonga, RAR or ?)

    NOTE: with shorter sector NAN/LAX FJ can put a lot more seats on their 744’s than QF.
    Think FJ has 458 in 2 classes, whereas QF’s average number of seats is under 400. That’s a huge difference.

    1 inch of seat pitch makes no difference to anyone at all, but a difference in fare does !!!

    Another possibility, use A330’s over the shorter sector. AKL/LAX was an A330 before it was pulled last month, so an A330 could easily do NAN/LAX or similar.

    The A330 that currently does LAX/JFK/LAX daily could be switched to a 763ER perhaps.

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