http://afr.com/premium/companies/200...X3CBVZSDD.html


War, virus take toll on Qantas

Mar 28 - Giles Parkinson and Damien Lynch

Shares in Qantas Airways on Friday slumped almost 10 per cent after the airline announced it would be unable to meet some analyst expectations for net profit in 2002/03.

The airline also said it would cut flights and staff numbers as bookings, particularly for inbound flights, fall because of the war in Iraq and the emergence of a deadly strain of pneumonia in Asia.

Qantas chief executive Geoff Dixon later told reporters during a briefing in Sydney that bookings for Japan (down 30 per cent) and the UK (down 18 per cent) were most affected, while US traffic was up a bit.

Mr Dixon said Hong Kong bookings had been holding up until about three days ago, but since then the drop had been ``quite horrendous''.

He declined to put a precise number on the Hong Kong bookings lost, only saying that ``scores'' and not thousands of people had been involved.

Qantas said it would slash its international flights by up to 20 per cent, confirming analyst fears that it had been hit by a fall in traffic numbers along with other carriers around the world.

Airlines in the US have reported a 40 per cent slump in international bookings and a 20 per cent slump in domestic bookings.

The US industry has asked for $6.8 billion in government aid, and airlines have suffered sharp falls in their share price and reports have suggested that American Airlines could make a bankruptcy filing as early as next week.

Qantas shares plummetted 32 to an 18-month low of $2.89, cutting more than $500 million off its market capitalisation.

The stock is at its lowest since the immediate aftermath of the September 11 terrorist attacks and has fallen from a record high of $4.92 reached in May last year.

Chief executive Geoff Dixon said the company had foreshadowed in February that its results could be adversely affected if tensions in Iraq and fears of terrorism continued. That was now a reality, but he insisted that the airline was still in a strong position compared to many other carriers.

"The company will still record a strong result for the year ended 30 June, 2003, and will remain one of the most profitable airlines in the world," he said in a statement.

Mr Dixon told reporters the group's net profit in 2002-03 would be about 15 per cent below analyst consensus expectations.

``We know what the market thinks and it is around about 15 per cent [below that],'' he said.

The airline had been expected to earn profits of nearly $600 million in the 2003 fiscal year, up from $428 million a year earlier. But some analysts in recent weeks have cut their earnings forecasts by around $100 million, which would tally with Mr Dixon's projection.

The chief executive said Qantas would now try to focus on the domestic holiday market for growth.

``We'll just see how we go,'' he said.

Mr Dixon said six out of 30 flights to Hong Kong would be cut each week, along with four flights to the UK, three flights to Los Angeles, and one weekly flight to each of Rome and Paris.

Flights to Chicago that had been due to start next week have been deferred and flights to Japan had also been reduced by 20 per cent.

Many other airlines around the world have taken similar measures, particularly Air France, british Airways and Lufthansa. In Asia, Japan Airlines has cut flights by nearly 10 per cent and Cathay Pacific has suffered a sharp fall in its share price.

Mr Dixon noted Qantas had already planned to use accumulated annual leave to reduce staff numbers by the equivalent of 2,500 full time employees and had implemented a staff freeze.

He told reporters the airline would put an additional 500 staff on the leave program in the coming six weeks, and had ``room'' to extend the program even further.

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~ Glen ~

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[This message has been edited by ozstamps (edited 03-28-2003).]