Qantas posts huge fall in profits

It couldn't happen to a more deserving airline

QANTAS has posted a net profit for the first half of 2009/10 down 72 per cent, but expects to post an underlying profit for the full year of $300-$400 million.

Qantas reported an underlying profit of $267 million for the first half of 2009/10, saying the company remained profitable, unlike many airlines. Reported profit was $58 million, down from $210 million in the first half of 2008/09.

Qantas chief financial officer Colin Storrie says the airline's first half result is probably the lowest first half profit on record. "In terms of the half year, last year was obviously lower than that in terms of statutory for the second half of last year, but obviously for a first half result I think that's pretty much the lowest statutory result that we have had," he said.

Sales and other income were $6.909 billion, down from $8.068 billion in the prior corresponding half year.

Qantas declared no interim dividend, however, and said dividends in future would depend on "ongoing earnings performance and capital requirements".

Qantas said its statutory profit before tax was $90 million for the half year, which it said was in line with guidance of a range of $50 million to $150 million.

Qantas chief executive officer, Alan Joyce, said that Qantas had been profitable while the global aviation industry remained in loss. "According to IATA, the world's airlines will record net losses of US$5.6 billion in 2010," Mr Joyce said.

"While the operating environment has been unprecedented and challenging, this result reflects the strength and diversity of our operations."

Mr Joyce said Qantas had benefited from its two-brand stategy. "Our two-brand strategy, focused on growing the full service, premium Qantas and low fares Jetstar, is not only delivering benefits to our customers, but also to our shareholders," he said.

"Qantas, in particular, has benefited from the capacity reductions and restructuring activities implemented since April 2009, with substantial cost savings achieved during the current half year

"Jetstar continues to provide the Group with true diversity, and our broader portfolio of assets with a unique strength and range of revenue growth opportunities."

Mr Joyce said uncertainty remained, particularly in international markets, industry capacity, passenger and freight demand, and high levels of volatility in fuel prices and exchange rates continued. "At current prices, fuel costs are expected to be approximately $200 million higher in the second half compared to the first half," he said. "In addition, depreciation costs will be approximately $50 million higher in the second half due to a reassessment of aircraft residual values.

"Subject to no further significant change in market conditions and fuel prices, Qantas expects Underlying profit before tax for the full year ending 30 June 2010 to be in the range of $300 - $400 million.

"In this context, coupled with significant capital expenditure program associated with fleet renewal, the Board considers it prudent not to pay an interim dividend, and future dividends will be assessed against ongoing earnings performance and capital requirements." ...

Mr Joyce said key drivers of the result had been weaker domestic and international demand and lower fuel surcharges that led to a 14.9 per cent decline in yield, lower capacity partially offset by an increase in seat factor (load) of 2.7 points, average fuel prices 38 per cent lower in the half-year, which contributed to a net $486 million decline in fuel costs, and activity cost savings and benefits from prior year restructuring which contributed to an 11.0 per cent fall in operating expenses (excluding fuel).

Non-recurring items were aircraft write-downs of $48 million related to changes in the recoverable value of a number of wide-body aircraft held for sale following capacity reductions announced last year.

SOURCE