A warning from Qantas that it expects its profit to fall by almost 90% has spooked investors.
The airline predicts that profit before tax for the year to June 30 to be in the range of $50 million to $100 million. That would be down from an underlying profit before tax of $552 million in the previous financial year.
Qantas shares slumped to an all-rime low on the news.
"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," Qantas said in a statement.
Qantas International posted a loss in earnings before interest and tax (EBIT) of more than $450 million in 2011-12, compared with a $216 million loss a year ago.
Qantas Group CEO Alan Joyce said the tough and worsening environment reinforced the importance of the Qantas International five-year transformation plan announced in August 2011.
‘‘We have taken decisive action to mitigate losses in Qantas international. We remain focused on returning Qantas international to profitability in 2014.’’
The airline has cut back on unprofitable long-haul routes, deferred plane purchases and announced plans to split the international and domestic arms into separate businesses.
The airline’s domestic operations are forecast to deliver earnings of more than $600 million, up from $552 million in the previous financial year.
By Ian Jarrett
