April 15, 2009

Qantas response to trading conditions

Qantas engine

Qantas has today announced that due to the deterioration of trading conditions in recent weeks, it is revising its 2008/2009 full year profit before tax forecast to between AU$100-200 million from AU$500 million.

Qantas chief executive officer, Alan Joyce, indicated that Qantas Airlines' international services and Qantas Freight were bearing the brunt of the deterioration in market conditions.

"Market conditions have deteriorated, especially in our international business. We are experiencing significantly lower demand, particularly in premium classes, and considerable price pressures with extensive sales and discounting by all carriers - in some cases leading to fare reductions of up to 50%.

"We have no choice but to lower our profit forecast and make major changes to ensure Qantas can weather the current commercial environment. This means moving immediately to reduce capacity in those areas of our business facing the greatest impact of market deterioration, but we will not be withdrawing from routes to achieve this.

"We have faced accelerated declines in passenger demand and revenue while market competition has intensified. Some competitors are reducing capacity, but overall market capacity into Australia has continued to grow despite falling demand."

In response to market conditions, Mr Joyce identified the following measures to be implemented:

  • A further 5% reduction in flying capacity, affecting frequency on Qantas Airlines international and domestic routes
  • Cuts to freight capacity, on both domestic and international routes
  • Grounding the equivalent of ten aircraft and making them available for sale
  • Deferring aircraft orders, including four Airbus A380s and twelve 737-800 aircraft
  • Exploring a number of options with Boeing about 787-800 aircraft including reducing, in the near term, the number of aircraft to be delivered
  • Reducing capital expenditure by at least AU$800 million in 2009/2010
  • Removing an additional 500 management positions

Qantas is widely regarded as the world's leading long-distance airline and one of the strongest brands in Australia. It currently operates a number of departures from leading UK airports.

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Qantas Response To Trading Conditions