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  • Dec 29, 2014
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Qantas to cut 1,000 jobs as airline forecasts half-year loss of up to A$300 million

Facing stiff competition from Virgin Australia, airline estimates A$300m loss for the first half amid rising fuel costs and falling ticket prices

PUBLISHED : Thursday, 05 December, 2013, 2:20pm
UPDATED : Friday, 06 December, 2013, 5:07am

Qantas Airways, Australia's largest carrier, yesterday flagged a record A$300 million (HK$2.1 billion) first-half loss and 1,000 job cuts, sending its shares down the most in 18 months.

Rising fuel costs and a fall in ticket prices amid an increasing supply of airline seats will drive the company to lose between A$250 million and A$300 million in the first half before tax and one-time items, the Sydney-based company said in a regulatory statement.

The shares plunged 11.2 per cent to close at A$1.07 in Sydney.

Qantas has called for support from Australia's government as second-ranked Virgin Australia funds attempts to take market share by selling new stock. The carrier said it will review its spending plans, freeze executive pay and look for other ways to cut costs as the outlook for the second half remained volatile.

"The loss is larger than expected," said David Liu, head of research at Above the Index Asset Management. "Qantas' investment grade rating is clearly at risk now. Maybe the government needs to step in and assist Qantas."

The cost of insuring the airline's corporate bonds against non-payment jumped 25 basis points to 215 basis points, according to traders of credit-default swaps at Westpac Banking Corp. That is on course for the biggest daily increase since June 22 last year, according to data.

Qantas, rated BBB-minus by Standard and Poor's, is one of just two carriers, with Southwest Airlines, to be judged investment grade by more than one ratings company.

The airline needs its domestic business, which posted more than A$450 million of operating profits last year, to support an international unit that faces stiff competition from state-owned carriers, said chief executive Alan Joyce.

"In the past we were able to live with an unlevel playing field in the international business because we had such a strong domestic franchise," Joyce said. The investments in Virgin Australia by Air New Zealand, Singapore Airlines and Etihad Airways change that, he said.

"You have three state-owned enterprises pumping money in to continue a loss-making business," Joyce said.

Brisbane-based Virgin's three airline shareholders had promised to buy as much as A$220 million of new stock through a capital raising announced on November 14. This will provide the airline with funds for a market-share battle that had previously left it short of cash.

Joyce has forecast Qantas' yields will drop to their lowest level since at least 2003 as a result of domestic and international competition.

The company said it expects free cash flow to be negative in the financial year to June 2014.

The airline "will go into a vicious circle of losing its investment grade credit rating and not being able to fund the replacement aircraft" if it cannot get free cash flow above its planned capital spending, Joyce told a parliamentary hearing in Canberra in February 2012.

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leormac
and rightly so Joyce should receive that pay cut.... since taking over he has failed to deliver a single target. It's the economy, passengers aren't traveling to Australia, aussie dollar is up..... the list goes on.
leormac
and rightly so Joyce should receive that pay cut.... since taking over he has failed to deliver a single target. It's the economy, passengers aren't traveling to Australia, aussie dollar is up..... the list goes on.
 
 
 
 
 

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