Qantas’s struggling international operations and weakness in the local domestic market has pushed the airline into the red to the tune of a $2.843 billion full year net loss.
The result for the 12 months to June 30 2014, was much worse than market consensus of an $828 million full year loss, according to a median of five analysts’ estimates compiled by Australian Aviation, largely thanks to Qantas International aircraft valuation write-downs.
Moreover, it was a steep decline from net profit after tax of $5 million in the prior corresponding period. Qantas’s full year results released to the Australian Securities Exchange on Thursday had a “restated” 2012/13 net profit of $1 million.
Qantas said underlying profit before tax, which the airline regarded as the best indication of its financial performance, fell to a loss of $646 million.
While the result was a little better than market expectations of a $770 million loss, the figure was a massive deterioration from the “restated” underlying profit before tax of $186 million in the prior year.
“The result reflects the very difficult operating environment the group has faced,” Qantas said on Thursday, citing weak demand in Australia, yield declines due to excess capacity and higher fuel costs due to a depreciating Australian dollar.
Qantas said the full year loss included an impairment charge of $2.56 billion on the carrying value of Qantas’s international operations, which will be split into a new holding company following.
“The decision has been made to establish a new holding structure and corporate entity for Qantas International to increase the potential for future external investment, and creates long-term options for Qantas international to participate in partnership and consolidation opportunities,” Qantas said.
There were also write-downs due to the restructure of its fleet ($394 million), redundancies, restructuring and other transformation costs ($428 million).
By segment, Qantas International recorded an underlying EBIT loss of $497 million, Qantas Domestic and EBIT profit of $30 million. Qantas Loyalty remains the group’s standout performer, posting an EBIT profit of $286 million. Jetstar Group made an underlying EBIT loss of $116 million.
Revenue fell three per cent to $15.352 billion, Qantas said.
No dividend was declared.