Qantas placed on ratings watch

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Published: June 8, 2012

Qantas A380. By Rob Finlayson

Rating agency Standard & Poor’s has placed Qantas Group (QF) on a ratings watch, citing concerns about the airline’s international business.

QF said earlier this week it expects to report a profit before tax of between A$ 50 million and A$ 100 million ($ 49 million – $ 98 million) for the financial year ending June 30. For the same period the previous year, QF posted a A$ 552 million profit.

QF also said its international business was expected to report full-year loss of more than A$ 450 million, more than doubling the loss of the previous year.

“The forecast result reflects the recent deterioration in global aviation operating conditions driven by the European economic crisis, the Group’s highest ever jet fuel bill, and substantial capacity increases in the domestic market that have reduced yields,” the Group said in a statement.

Fuel costs across the group are expected to reach A$ 4.4 billion, an increase of around A$ 700 million on the prior year, according to the statement.

QF CEO Alan Joyce said the tough and worsening environment reinforced the importance
of the Qantas International five-year transformation plan announced in August 2011 (ATW Daily News, Aug. 17).

“We have taken decisive action to mitigate losses in Qantas International by withdrawing from lossmaking routes, reducing capital investment, and transforming Qantas engineering. The introduction of a new Qantas Group structure with dedicated CEOs for Qantas International and Qantas Domestic will bring further rigor to our business,” he said.

In the domestic market, the airline said both Qantas and Jetstar will deliver improved results compared to the previous year and combined the two flying brands will deliver earnings before interest and tax of over A$ 600 million.

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