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Qantas earnings soar but future developments may clip its wings
August 19, 2004
Sydney - Australian flag carrier Qantas reported a record full-year to June net profit of A$648.4 million (R2.98 billion) on Thursday but warned rising fuel prices and domestic overcapacity were clouding its outlook.
The result was significantly better than the previous year's profit of A$343.5 million but was at the lower end of market expectations.
Chief executive Geoff Dixon said oil prices were putting pressure on the airline to raise a fuel levy on fares, with the surcharge on domestic tickets likely to increase A$3 to A$9 and international fares A$5 to A$15.
Dixon said the 88.8 percent rise in annual net profit was achieved in difficult conditions and the group had responded well to a myriad of challenges.
"Cost and efficiency savings of 512 million dollars offset a flat revenue line that is still recovering from the war in Iraq and SARS," Dixon said.
He said increased capacity in the Australian domestic market was a major issue as Qantas' budget offshoot Jetstar spearheads the airline's response to low-cost carrier Virgin Blue.
Virgin Blue has expanded rapidly in Australia since launching in 2001 but Qantas said it would not allow its own domestic market share to fall below 65 percent.
Chairwoman Margaret Jackson said oil prices could have a major impact on the airline, with Qantas estimating its fuel bill for fiscal 2005 will increase by more than A$400 million to about A$1.6 billion if current prices continue.
"Our industry is still far from stable, with crude oil prices at record highs and annual global traffic numbers below those for 2000," Jackson said.
Analysts agreed oil would be a key issue for Qantas and other transport operators in the year ahead.
"There's obvious concern about the cost of oil and what that does for the cost of doing business for transport companies," ANZ senior economist David de Garis said.
Despite the obstacles, Dixon said Qantas' outlook was "quite strong" and the airline was capable of improving on the latest result in the next financial year.
Dixon said Qantas' latest expansion plan, a Singapore-based joint venture budget carrier, was set to take off in December.
He denied the Asian budget carrier market was approaching saturation point and said the new venture intended to expand by carving out new routes in the region.
Details of the as-yet unnamed project are expected to be released next month.
Qantas celebrated the record result by awarding all its staff a A$1 000 bonus at a total cost of A$50 million.
It also announced Dixon's contract had been extended by 18 months to July 2007, giving him a two-million-dollar remuneration package.
Qantas shares fell 14 cents or 4.2 percent to A$3.19 midday in a rising overall market. - AFP
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