Qantas denies shelving of Asian plans

Qantas says reports it will delay the establishment of an Asian airline are speculation, but the airline does say it needs to be flexible depending on market conditions.


Uncertain global economic conditions, particularly in Europe, have Qantas management considering delaying plans to establish a premium carrier in Asia and instead seeking an alliance with Malaysia Airlines, The Australian Financial Review reported.

Chief executive Alan Joyce said no final decision had been made on the the establishment of an Asian carrier or an alliance. “We obviously keep all of our options open,” he told ABC Radio.

“We believe that a new premium airline in Asia is important for us.

“The timing of that airline and how it works with partners is still part of the discussions we’re having with both Singapore and Malaysia and no final decision has been made on what we are going to do.”

But Mr Joyce did say Qantas needed to be flexible in its plans and able to respond to market conditions.

“We are not going to communicate or talk about the speculation that’s in the press,” he said.

Qantas on Monday forecast a fall in first half underlying profit of up to 66 per cent, due to $650 million in costs from rising fuel costs and industrial disputes with unions.

It expects to post an underlying net profit of $140 million to $190 million in the six months to December 31, which compares to a $417 million underlying profit in the first half of 2010/11.

At 1321 AEDT Qantas shares were up 7.25 cents, or five per cent, at $1.525.

The stock closed at $1.455 on Friday, the lowest since October 6. City Index chief market analyst Peter Esho said the share gain should be kept in perspective.

“The (profit) number is a large fall on last year’s $417 million profit result for the first half, but back then the share price was trading at around $2.50,” he said.

Qantas said its first half performance reflected a challenging operating environment, with uncertainty in global economic conditions, elevated fuel prices and volatile foreign exchange rates.

The impact of industrial dispute with unions representing pilots, ground staff and engineers was $194 million in the first half, Qantas said.

That comprised a $68 million cost from industrial action taken before chief executive Alan Joyce’s grounded the airline’s entire fleet. The impact of the grounding itself, including lost revenues, refunds and accommodation over three days was $70 million, net of cost savings, Qantas said.

There was also a $27 million hit to forward bookings and a $29 million cost for “customer recovery initiatives”.

Mr Joyce said customers had returned since Fair Work Australia (FWA) put an end to any further industrial action, with a “strong, quick recovery in forward bookings”. “We have seen customers return to Qantas,” Mr Joyce said.

“Domestic bookings, including from corporate accounts, have recovered particularly well and are now back to normal levels.”

Mr Joyce said forward bookings for international travel in the second half of the financial year were “in line with normal trends”.

Qantas said it was unable to offer earnings estimates for the second half, because of volatility associated with economic conditions, fuel prices and foreign exchange rates.