Qantas slumps to record loss of US$2.65 billion

By Martin Parry, AFP

SYDNEY, Australia — Australian flag carrier Qantas on Thursday posted a record annual net loss of AU$2.84 billion (US$2.65 billion), but chief executive Alan Joyce insisted clearer skies lie ahead after aggressively cutting costs. The worse-than-expected result compared with a wafer-thin profit in the previous year, with one-off restructuring and redundancy payouts hammering the bottom line. But the biggest hit came from a AU$2.6 billion non-cash write-down of the value of its ageing international fleet, largely due to the historic cost of aircraft purchased at a much lower Australian dollar exchange rate. Qantas’s underlying loss before tax in the 12 months to June 30 — its preferred measure of financial performance, which excludes one-off costs and writedowns — was AU$646 million, slightly better than forecast. Analysts had been expecting a net loss of up to AU$1 billion as the carrier also battles high fuel costs and fierce competition from subsidized rivals. Qantas in February announced it was axing 5,000 jobs, deferring aircraft deliveries, freezing growth at Asian offshoot Jetstar and cutting routes in a bid to turn around its fortunes. Joyce said the worst was now over. “There is no doubt today’s numbers are confronting, but they represent the year that is past,” he said. “We have now come through the worst. With our accelerated Qantas Transformation program we are already emerging as a leaner, more focused and more sustainable Qantas Group.

“There is a clear and significant easing of both international and domestic capacity growth, which will stabilize the revenue environment,” he added.

“We expect a rapid improvement in the group’s financial performance — and a return to underlying profit before tax in the first half of FY15, subject to factors outside our control.” Qantas’s share price closed 6.95 percent higher at AU$1.385, with analysts saying investors felt a bottom had been reached. “It’s a horrible read, but some light is visible at the end of the tunnel,” said IG Markets’ Evan Lucas of the results.