Higher fuel costs, expenses from an industrial dispute and chief executive Alan Joyce’s decision to ground the carrier’s entire fleet have prompted Qantas Airways to forecast a sharp drop in first half profit.
The airline has also dismissed reports it is considering delaying plans to establish a premium Asian carrier because of the global economic uncertainty.
Qantas said on Monday it expected underlying profit before tax in the first half of 2011/12 to fall up to 66 per cent, to a range between $140 million and $190 million.
That would be well below the $417 million recorded in the prior corresponding half.
Mr Joyce again defended the decision to ground the Qantas fleet in October ahead of a planned staff lockout, saying it would have been unsustainable to manage ongoing industrial action.
“Since the termination of industrial action by Fair Work Australia we have seen customers return to Qantas,” Mr Joyce said in a statement.
“We can now provide absolute certainty for our passengers and this has led to a strong and quick recovery in forward bookings.
“Domestic bookings, including from corporate accounts, have recovered particularly well and are now back to normal levels.”
The airline said it expected to incur $194 million in costs from industrial action stemming from negotiations with unions representing pilots, ground staff and engineers, and the three-day shutdown.
Meanwhile, Qantas said underlying fuel costs were expected to rise $450 million to $2.2 billion in the six months to December 31, amid higher jet fuel prices and increased flying.
Qantas shares closed up on the announcement, gaining five cents, or 3.44 per cent, to $1.505 on a day the broader market added about 1.8 per cent.
The stock was still well below its 2011 high of $2.54, reached in February.
Qantas said its first half performance reflected a challenging operating environment, with uncertainty in global economic conditions, elevated fuel prices and volatile foreign exchange rates.
No guidance was given for the second half of the financial year due to the volatility of economic conditions, fuel prices and foreign exchange rates, Qantas said.
However, Mr Joyce said no final decision had been made on the establishment of an Asian carrier or a tie-up an airline in the region.
The Australian Financial Review reported that uncertain global economic conditions, particularly in Europe, had Qantas considering delaying plans to establish a premium carrier in Asia and instead seeking an alliance with Malaysia Airlines.
“We believe that a new premium airline in Asia is important for us,” Mr Joyce told ABC Radio on Monday.
The timing and how the airline would work with partners was part of ongoing discussions with both Singapore and Malaysia, he said.
Mr Joyce did say Qantas needed to be flexible in its plans and be able to respond to market conditions, although he added that he would not speculate on what was reported in the media.
In August this year, Qantas announced plans to establish a premium carrier based in either Kuala Lumpur or Singapore.
