Qantas says it is looking for cost cuts totalling $1.5 billion over the next three years, after reporting a sharp fall in profit for the year to June 30, which included a second half loss.
The airline says it is targeting of $500 million in cuts over the rest of the 2010 financial year.That’s after cuts of some $3 billion in the previous five years.
Final dividend has been omitted after paying a 6 cents a share offering at the half way mark.
Net profit for 2008-09 was $117 million, down 88% on 2008 when more than $1 billion was earned.
Jetsar’s record profit and earnings from the frequent flyer program kept the airline in the red. No wonder it has called off the float of the frequent flyer business.
No guidance was given for the current year.
Qantas said that there were signs of an improvement in passenger volumes.
Yields had also stabilised at the levels experienced in the second half of the 2009 financial year.
"High levels of volatility in the economic outlook, industry capacity, passenger demand, fuel prices and exchange rates continue, the company said.
"Given the high level of uncertainty, it is not possible to provide any profit guidance."
First half earnings before tax were $288 million, the full year’s figure was $181 million, indicating the airline plunged into the red in the second half as the global recession and credit crunch hit passenger levels, especially in the premium priced business and first class sectors.
It lost $93 million in the second half, against a profit of $351 million in the final six months of 2008.
Qantas sales for the 12 months to June 30 fell 6.9% to $14.55 billion.
Revenue was up 1.7% to $7.9 billion in the first half, so topline sales and profit margins were badly crunched over the final six months.
Qantas signalled that in earl April when it abandoned guidance for full year profit of around $500 million before tax and produced a new figure in a range of $100-$200 million.
As well the airline revealed cuts to staff numbers, routes, service frequencies, parked some planes and froze as many variable costs as it could.
Those cuts and an apparent steadying in the market enabled the company to meet the lowered guidance and the shares jumped 5% or 13 cents to $2.73, the highest level since January and then fell back to close at $2.69, for a gain of 3.4% on the day.
The airline said the cost cutting program called Q Future "will focus on Qantas operations and improving efficiencies across a range of areas, including sales and distribution, fuel conservation, aircraft utilisation and schedule, and procurement.”
Qantas chief executive Alan Joyce said in yesterday’s statement; "We are also keeping a close watch on oil and fuel prices.
"While well below the record levels seen in 2008, they remain volatile and are trending upwards.
"For 2010, the Qantas group has hedged 80 per cent of fuel costs at a worst case price of $US89 per barrel.”
The airline said that under present circumstances, the board considered it prudent not to pay a final dividend.
Future dividends would be assessed against ongoing earnings performance and capital requirements.
Mr Joyce said the diversity of the Qantas group’s operations had contributed to it being one of the few airlines worldwide to produce a full year profit during the global economic downturn.
"There has never been a more volatile and challenging time for the world’s aviation industry,” Mr Joyce said.
"When most airlines are reporting losses, the Qantas group is reporting a profit for the full year.
"Through unprecedented and significant shifts in operating conditions and demand, we have remained financially strong.”
Mr Joyce said the 2008-09 year was one of two contrasting halves, with the first half characterised by a generally favourable operating environment and strong demand.
In the second half, the environment deteriorated as competitors continued to lift capacity while demand softened quickly as the global slowdown hit.
This was compounded by protracted industrial action, swine flu and costs associated with introducing the new A380 aircraft.
The airline said in its statement that the key drivers of the result were:
- Weaker domestic and international demand, which led to a 4.3 per cent yield decline and a 1.1 per cent decrease in seat factor (load) to 79.6 per cent for the Group; and;
- Capacity cuts of 1.9 per cent across the Group, which led to the removal of some variable operating costs as well as reduced revenue. Jetstar, however, increased capacity during the year through network growth.
The Group also experienced one-off events during the year which affected the result, including:
- Industrial action by the Australian Licenced Aircraft Engineers Association, with a resulting maintenance backlog, which cost an estimated $130 million in additional expenses and lost revenue;
- The impact on profitability of the H1N1 Influenza 09 virus, estimated at $45 million; and
- Costs associated with the introduction of the new Qantas A380, estimated at $37 million.
Non-operating items included in the year’s result were:
Aircraft write-downs and provisions of $152 million, whi
