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Qantas reports DOUBLING its profit in an industry losing $12 Billion a year

Qantas reports DOUBLING its profit in an industry losing $12 Billion a year

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Old Feb 20, 03, 12:31 am
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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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Old Feb 20, 03, 12:42 am
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"The performance of Qantas in this environment is a tribute to the efforts of staff and management.''

And their reward is:- 1500 to be sacked !!!!


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Old Feb 20, 03, 12:44 am
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Apologies hit the send button twice !!


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[This message has been edited by QFF (edited 02-20-2003).]
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Old Feb 20, 03, 1:02 am
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"Qantas also reported that members of a web site called FlyerTalk were major contributors towards the healthy increase in profits and would like to thank them for their continued patronage."

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Old Feb 20, 03, 1:11 am
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<font face="Verdana, Arial, Helvetica, sans-serif" size="2"> 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. [/B]</font>
So that's why we can never find a seat in QC and have to stand at the Bar!!

<font face="Verdana, Arial, Helvetica, sans-serif" size="2"> QantasLink improved its EBIT result by 78.3 per cent, to $37.8 million. [/B]</font>
That'll be all those SYD/NTL SC-chasing flights by Dave thadocta

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Old Feb 20, 03, 1:26 am
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<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by LindsayWilson:
"Qantas also reported that members of a web site called FlyerTalk were major contributors towards the healthy increase in profits and would like to thank them for their continued patronage." </font>
But when the markets analysed the bar costs, the QF share price dropped from $3.80 down to $3.36.
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Old Feb 20, 03, 2:16 am
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<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by QFF:
"
And their reward is:- 1500 to be sacked !!!!

</font>
That is NOT what QF said.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ozstamps:

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.


[/i]

</font>
There is a bit of difference to sacking someone and encouraging staff to take leave entitlements that have already been provisioned in the balance sheet.

Which would you choose QFF?

Hopefully by mid year all the war (and war talk) will be over and we can start worrying about other things, like improving yield.
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Old Feb 20, 03, 3:12 am
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<font face="Verdana, Arial, Helvetica, sans-serif" size="2"> But when the markets analysed the bar costs, the QF share price dropped from $3.80 down to $3.36.[/B]</font>
Hell, what's going to happen on Monday then?? I'd better sell my shares now

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Old Feb 20, 03, 4:03 am
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"Qantas Airways said today it would cut 1500 jobs as international tension slows demand."

Guess it depends which part of the article is true.

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[This message has been edited by QFF (edited 02-20-2003).]
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Old Feb 20, 03, 4:08 am
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No, that's what the editors wrote for the sensationalism so people would read the story...in the release, it was quoted correctly:

[QUOTE]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.[ENDQUOTE]
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Old Feb 20, 03, 4:31 am
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My apologies ---- indeed it was sensationalism. It gets worse in The Sydney Daily Telegraph:

"Qantas Airways said today it would cut 1500 jobs as international tension slows demand"

and

"Unions yesterday were outraged at reported plans by Qantas to sack 2500 staff - 10 per cent of its workforce "

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[This message has been edited by QFF (edited 02-20-2003).]

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Old Feb 20, 03, 4:43 am
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Front page article it looks like in Friday's Australian Financial Review. QF Share price dropped $1 BILLION today. Interestingly about 10% of the profit rise was due to the rising $A.

I subscribe, otherwise it is 'pay per view', but says:

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

--------------------------------

Qantas hits severe turbulence

Feb 20 16:30 Jim Parker

Investors clipped the wings of Qantas Airways on Thursday, cutting $1 billion from its market value after it warned that growing turbulence from war and terrorism fears are threatening its profit outlook.

Australia's national flag carrier unveiled plans to buttress itself against a slump in forward bookings by reducing flights, freezing discretionary spending and cutting the equivalent of 1,500 jobs through the use of leave entitlements.

"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," said Qantas chief executive Geoff Dixon.

The warning, coinciding with escalating fears of war and terrorism on global markets, completely overshadowed the group's announcement that it had more than doubled half-year net profit to $352.5 million.

Investors responded by sending its shares spiralling down 44, or nearly 12 per cent, to $3.36, their lowest close in 16-months.

With the new contingency measures, Mr Dixon said Qantas expected to meet its full-year profit targets. However, if tensions over Iraq and terrorism continued, bookings could deteriorate further.

"In such an environment, our profit target would certainly become more difficult to achieve, Mr Dixon said.

Analysts said the violent market reaction appeared overdone, but was symptomatic of the jumpy nature of investor sentiment.

"The outlook shouldn't really be that surprising given what's happening in the world. It just seems the market has little patience with anyone who disappoints in any shape or form," said one analyst.

The renewed threats to air travel come at a difficult time for Qantas as it seeks to win regulatory approval for its proposed alliance with Air New Zealand and renew its profit-sharing agreement with 19 per cent shareholder British Airways. The Air New Zealand deal threatens to extend its stranglehold on domestic routes to a virtual monopoly on the key trans-Tasman sector, lessening competition in an already rapidly thinning marketplace.

Still, the half-year net profit was well ahead of market forecasts of $330 million, and represented a 130 per cent improvement from $153.5 million last year.

It was built on a solid improvement in international operations after the initial shock to air travel from the September 11, 2001, terrorist attacks in the United States. Earnings before interest and tax rose from a loss of $15.5 million to a profit of $263.9 million.

Domestic operations contributed $197.9 million in pre-tax earnings, down l .7 per cent from the previous corresponding period. Yield deteriorated 5.1 per cent, but was offset by a 22 per cent rise in load following the collapse of rival Ansett.

The rising Australian dollar contributed $32.5 million to the half-year result. Fuel costs fell 7.9 per cent or $69 million as the company's hedging activities protected it against the rising price of oil. Revenue was up 9.3 per cent to $5.9 billion.

The company declared a fully franked interim dividend of 8 a share, payable on April 9.


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Old Feb 20, 03, 7:02 pm
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http://biz.yahoo.com/bw/030220/200292_1.html
Press Release Source: Qantas Airways

Qantas Half Year Profit before Tax of $513.1 Million
Thursday February 20, 5:51 pm ET

SYDNEY, Australia--(BUSINESS WIRE)--Feb. 20, 2003--Qantas today announced a profit before tax of $513.1 million for the six months to 31 December 2002. Profit after tax was $352.5 million.

The Directors declared a fully franked interim dividend of 8 cents per share.

Qantas Chairman Margaret Jackson said the result was most 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."

Ms. Jackson said recent events, and the general worldwide uncertainty, highlighted the important role played by Qantas in Australian life.

"I have no hesitation in saying that all Australians should not underestimate the social, economic and strategic contribution that Qantas makes to this country on a daily basis."

Qantas Chief Executive Officer Geoff 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;
* Qantas had grown some 50 per cent domestically to meet the market demands flowing from the collapse of Ansett;
* Considerable resources are being put towards major upgrades and improvements. By the end of this financial year, Qantas will have invested approximately $6 billion on new aircraft, in-flight entertainment, seating and other product initiatives since the collapse of Ansett;
* 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) totaled $263.9 million," he said. "This compared with an EBIT loss of $15.5 million in the same period the previous year, which was affected by the events of September 11."

Revenue Passenger Kilometers (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 unfavorable 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 unfavorable impact of foreign exchange movements) but was offset by a 22 per cent increase in load due to 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. "Before the end of this financial year, for example, we will begin flying single class 767-300s to the Gold Coast."

Mr. 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."

Mr. Dixon said Qantas had taken steps in recent weeks to meet the changing market and economic conditions. These included:

* Reductions in planned flying from March in both the domestic and international operations;
* The use of accumulated annual and long service leave entitlements to reduce staffing between now and 30 June 2003 by the equivalent of 1,500 full time employees. This initiative will closely match the reductions in flying and will also involve management and non-flying staff;
* A freeze on discretionary expenditure.

Mr. Dixon said that, with these and other initiatives and assuming no further deterioration in demand, Qantas was still on track to achieve its full year profit target.

However, if tensions continue around Iraq and terrorism, bookings could further deteriorate.

"In such an environment, our profit target would certainly become more difficult to achieve," he said.

Mr. Dixon said Qantas was well positioned to maximize its opportunities when the global travel market recovered.

Subsidiary operations

Subsidiary operations contributed $112.8 million in EBIT, an increase of 6.5 per cent over the previous corresponding period.

* 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. SnapFresh, one of the most modern meal production centers in the world, commenced sales of domestic and international economy meals to Qantas and a number of other major international airlines during the period.
* QantasLink, which operates more than 2,700 flights each week to 55 destinations within Australia, improved its EBIT result by $16.6 million, or 78.3 per cent, to $37.8 million primarily due to improved load. QantasLink also benefited from the cessation of Beechcraft 1900 operations.
* 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, totaled $6.9 million resulting in a total EBIT loss for the period of $2.5 million.

Group Revenue

Revenue for the half year totaled $5.9 billion, an increase of $0.5 billion or 9.3 per cent. Excluding the impacts of foreign exchange rate movements, total revenue increased by 10.5 per cent.

Passenger revenue increased by 10.8 per cent, with RPKs growing 9.4 per cent and yield improving 1.2 per cent.

Expenditure

Total expenditure rose by 4.6 per cent to $5.3 billion. Excluding the impacts of foreign exchange rate movements, total expenditure increased by 6.5 per cent. This was primarily due to a 5.2 per cent increase in overall capacity and higher manpower costs following EBA settlements.

Cost per Available Seat Kilometer, excluding the impact of exchange, increased by 0.2 per cent.

Fuel costs decreased by 7.9 per cent, or $69.0 million. The hedged fuel price is 1.5 per cent lower than last year. This was driven by a higher underlying fuel price, increasing costs by $28.8 million. Additional activity further increased fuel costs by $8.6 million. Higher fuel hedging benefits lowered costs by $47.6 million while the strengthening of the Australian dollar relative to the US dollar further reduced fuel costs by $58.8 million.

There were substantial cost increases in insurance, security costs and domestic landing charges, which were partly offset by direct passenger recoveries.

Net interest expense decreased by 39.5 per cent. While average net debt was higher than the prior half year, interest rates were lower and $49.3 million of interest was capitalized into aircraft progress payments (compared with $31.9 million in the previous corresponding period).

The net impact of favorable foreign exchange movements was a $32.5 million benefit to profit.

Balance Sheet and Cash Flow

Cash flow from operations totaled $909.1 million, an increase of $497.6 million versus the prior period. This was due to increased profitability, lower tax payments and favorable movements in working capital.

The debt-to-debt plus equity ratio, (including operating leases on a hedged basis) moved from 48:52 at 31 December 2001 and 49:51 at 30 June 2002 to 47:53 at 31 December 2002. The improvement was driven by strong operating cashflow and the raising of $717.6 million in equity during the year, offset by progress and delivery payments made for the fleet upgrade.

Notes

* The fully franked interim ordinary dividend of 8 cents per share is payable on 9 April 2003, with a record date (books close) of 12 March 2003.
* Monetary amounts are reflected in Australian currency, unless otherwise noted.

------------------------------------------------------------------------
Contact:

Agnes Huff Communications
Agnes Huff, PhD, 310/641-2525
[email protected]
or
Qantas Airways
Steve Kernaghan, 310/726-1426
[email protected]


------------------------------------------------------------------------
Source: Qantas Airways
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Old Feb 20, 03, 7:17 pm
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<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by QFF:
"The performance of Qantas in this environment is a tribute to the efforts of staff and management.''

And their reward is:- 1500 to be sacked !!!!
</font>
Bollocks, read it again, nothing at all like 1500 employees being sacked.

Could be a good thing though, there's a lot more than 1500 Union bludgers on the books at QF. Get rid of them and hire people who will work for a living.


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Old Feb 21, 03, 11:58 pm
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