Qantas reports DOUBLING its profit in an industry losing $12 Billion a year
http://www.smh.com.au/articles/2003/...638404899.html
Qantas unveils $352m profit
February 20 2003
Qantas Airways said today it would cut 1500 jobs as international tension slows demand. And it revealed its half-yearly profit has more than doubled to $352.5 million.
The airline said it would use accumulated annual and long service leave entitlements to reduce staffing between now and June 30, 2003, by the equivalent of 1,500 full time employees.
As well it would reduce planned flying from March in both the domestic and international operations.
The staffing initiative would closely match the reductions in flying and will also involve management and non-flying staff, Qantas said.
Qantas today reported a net profit of $352.5 million for the half year ended December 31, 2002, up 129.6 per cent.
It maintained its interim dividend at a fully franked eight cents per share.
Qantas chief executive officer Geoff Dixon said that in recent weeks the solid recovery seen in international markets and the growth in domestic flying experienced in the first half had come under pressure from the heightened tensions surrounding Iraq and the very public threat of terrorism.
"Forward bookings for the next 16 weeks have slowed considerably in some markets, including Japan, Europe and the United Kingdom. All carriers appear to be affected," he said.
Mr Dixon said Qantas had taken steps in recent weeks to meet the changing market and economic conditions.
These included the reductions in planned flying and the staffing reductions.
A further initiative was a freeze on discretionary expenditure.
Mr Dixon said Qantas was well positioned to maximise its opportunities when the global travel market recovered.
Qantas chairman Margaret Jackson described today's profit result as pleasing, particularly given challenges and difficulties in the aviation industry.
``The world's airlines lost about $US18 billion in the 2001 calendar year,'' Ms Jackson said. ``Losses are expected to total $US12 billion in 2002.
``In the United States, two of the largest carriers - United Airlines and US Airways - have filed for bankruptcy protection. Many other carriers in the United States, Europe and South America continue to report losses, shed staff and retire aircraft.
``The performance of Qantas in this environment is a tribute to the efforts of staff and management.''
Mr Dixon said the result had been achieved in circumstances where domestic air fares were at historic lows, with the Bureau of Transport and Regional Economics revealing discount domestic fares were 23 per cent cheaper than three years ago.
It also was achieved in circumstances where Qantas had grown some 50 per cent domestically to meet the market demands flowing from the collapse of Ansett and considerable resources are being put towards major upgrades and improvements.
He said that by the end of this financial year, Qantas will have invested approximately $6 billion on new aircraft, inflight entertainment, seating and other product initiatives since the collapse of Ansett.
As well, the result was achieved in an environment of increasingly fierce competition and discounting from many international airlines.
Mr Dixon said while all areas of the business had contributed to the result, the improvement of the international operations stood out.
International operations earnings before interest and tax (EBIT) totalled $263.9 million compared to an EBIT loss of $15.5 million previously.
Revenue Passenger Kilometres (RPKs) for international operations increased by 2.5 per cent on reduced capacity of 3.3 per cent, leading to an improvement in load factors of 4.6 percentage points.
Yield, excluding the impact of unfavourable movements in foreign exchange, increased by 4.3 per cent with nearly all route groups providing a positive return.
Domestic airline operations, including QantasLink, contributed $197.9 million in EBIT, 1.7 per cent less than the previous corresponding period.
Yield deteriorated by 5.1 per cent (after excluding the unfavourable impact of foreign exchange movements) but was offset by a 22 per cent increase in load because of the airline's efforts to meet national market demand following the collapse of Ansett.
In addition, a significant increase in taxes and levies contributed to the decline in domestic yields.
``We expect to improve our margins going forward as we continue to roll out our strategy to operate all-economy class aircraft on leisure routes that have little or no demand for business travel,'' Mr Dixon said.
Qantas' subsidiary operations contributed $112.8 million in EBIT, an increase of 6.5 per cent.
Qantas Holidays increased EBIT by 14.2 per cent to $19.3 million, primarily due to growth in the domestic market. The outbound market was detrimentally affected by the Bali bombings and travel warnings to destinations including Thailand and Malaysia.
Qantas Flight Catering EBIT fell by $1.4 million, or 3.7 per cent, to $36.6 million. QantasLink improved its EBIT result by 78.3 per cent, to $37.8 million.
Australian Airlines, which commenced operations in late October 2002, achieved an underlying operational EBIT of $4.4 million for the period to 31 December 2002.
Start-up costs, including crew and pilot training and recruitment, totalled $6.9 million resulting in a total EBIT loss for the period of $2.5 million.
Fuel costs decreased by 7.9 per cent or $69 million.
The net impact of favourable foreign exchange movements was a $32.5 million benefit to profit.
AAP
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