Qantas H1 Profit Drops, To Raise USD$322 Mln
February 4, 2009
Australian airline Qantas said first-half profit fell 66 percent, hurt by high fuel costs and a downturn in international travel, and flagged a AUD$500 million (USD$322 million) equity raising to repay debt.
Qantas, like many other airlines, is battling slumping demand for air travel as the global economy faces its worst financial crisis since the Great Depression. Airlines have responded by trimming capacity to adjust to the worsening demand.
Qantas, which will also use the funds to renew its fleet, said it was not immune to the global recession, but reconfirmed profits before tax for the full year would be around AUD$500 million.
Qantas cut its full-year profit forecast by 65 percent in late November and said it had made capacity reductions equivalent to grounding 10 planes.
Global passenger traffic will fall 3 percent this year, the first drop since 2001, and airline losses will total USD$2.5 billion, putting hundreds of thousands of industry jobs at risk, the International Air Transport Association (IATA) said in December.
"The aviation sector is experiencing a high degree of volatility," chief executive Alan Joyce said in a statement.
"Numerous airlines have failed over the past year, while many are unable to produce profits and are at risk of becoming unsustainable," he said.
Qantas said on Wednesday it will cut its fiscal year 2010 capacity growth to 2 percent from 10 percent planned earlier. Its net debt at end December was AUD$6.46 billion, up 38 percent from end June.
Qantas' profit after tax dropped to AUD$210 million for the six months to December 31, down from AUD$618 million in the previous corresponding period.
Analysts said Qantas' soft operating results weighed on shares of smaller rival Virgin Blue, which fell 6.4 percent to AUD$0.295, outpacing a 0.9 percent fall in the benchmark S&P/ASX 200 index.
Fuel costs for the period were AUD$2.2 billion, nearly 29 percent higher than the previous half year.
Qantas said it would pay an interim dividend of 6 cents.
Shares of the airline, which has a market value of USD$2.8 billion, were suspended on Tuesday pending the announcement. The stock has fallen 14 percent in the last month and 52 percent over the past year as global economic conditions worsened.
