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Qantas flags profit to tumble on international losses
June 5, 2012 / 1:17 AM / 5 years ago

Qantas flags profit to tumble on international losses

SYDNEY (Reuters) - Australia’s Qantas Airways (QAN.AX) warned on Tuesday its underlying profit before tax will fall by up to 90 percent due to deeper losses at its international operations, weak travel demand and soaring fuel costs, sending its shares to a record low.

<p>The tail of a Qantas 747 is reflected in a window at Kingsford Smith international airport in Sydney May 22, 2012. REUTERS/Daniel Munoz</p>

Qantas, which plans to split its profitable domestic and loss-making international operations from next month, said underlying profit before tax for 2011/12 was seen at A$50 million ($48.6 million) to A$100 million.

That compared with A$552 million a year ago and a A$285 million average expected by analysts. The warning sent shares of Qantas down by as much as 18.3 percent. By 8:13 EDT, the shares had trimmed losses to trade 12.7 percent lower at A$1.245.

Qantas’ warning underlines the global aviation sector’s struggles as high oil prices and sagging demand due to the European economic crisis take their toll.

The International Air Transport Association has downgraded its forecast for airline profits in 2012 to $3 billion from $3.5 billion, and has said that a further economic downturn could see a net loss for the sector.

Qantas said its international business was seen posting a loss in earnings before interest and tax (EBIT) of more than A$450 million in 2011/12, compared with a A$216 million loss a year ago. The domestic operations EBIT was seen at over A$600 million.

“We are attacking costs and allocating aircraft and capital efficiently. Over A$300 million in annual benefits have been identified from the changes we are making,” said Chief Executive Alan Joyce, who aims to return the international business to profit by 2014.

The airline said with a cash balance of more than A$3 billion, an undrawn standby facility of A$300 million, and the flexibility to cut or raise capital investment it remains in a strong funding position.

(Reporting by Narayanan Somasundaram; Editing by Richard Pullin)

This story has been corrected to fix spelling in headline

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