Qantas shares plunge as Etihad swoops

Qantas Airways shares plunged to an all-time low after it warned that full-year profit could fall by as much as 91%.

The airline’s woes are exacerbated by Abu Dhabi-based Etihad acquiring a 4% stake in rival Virgin Australia Holdings and the arrival of a new low-cost carrier, Singapore-based Scoot.

The share purchase cements the 2-year-old alliance between Etihad and Virgin, in which Air New Zealand has a near 20% a stake.

The Gulf airline’s move follows a denial by Qantas that it is seeking an alliance with the much bigger Dubai-based Emirates Airline.

Virgin recently split off its international arm with the object of attracting more overseas investors, while Qantas – restricted by legislation limiting overseas ownership – has announced plans to split its domestic and international operations.

Etihad, which has bought shares in Virgin’s ASX-listed shares that own the domestic airline, has a strategy of buying up stakes in foreign airlines. Most recently it has a 29% shareholding in Germany’s second largest carrier, Air Berlin, and 3% of Irish airline Aer Lingus.

Qantas, meanwhile, has pinned its future on the expansion of its low-cost subsidiary, Jetstar, which is rapidly expanding in Asia from its Singapore base and is soon to launch a Japanese airline.

In yesterday’s announcement, it warned that pretax underlying profit for the year to June 30 would come in at between $A50 million and $A100 million, compared with $A552 million a year earlier. The shares fell 18% to close at $A1.16.

The weak forecast reflects downward pressure on demand created by Europe's debt crisis, soaring jet-fuel costs, declining bond yields and competition in Australia's domestic travel market, the airline says.

The full-service international unit is running heavy losses, with earnings-before-interest-and-tax (ebit) showing a deficit of more than $A450 million – more than double the $A216 million loss reported for last year.

The domestic operation and Jetstar are expected to have a pretax profit of $A600 million on an ebit basis.

Jetstar faces fresh competition with the maiden flight yesterday by Singapore Airlines-owned Scoot to Sydney.

A technical glitch marred the yellow-liveried airline's launch with the full Boeing 777 aircraft carrying 400 passengers delayed by 100 minutes on takeoff from Singapore.

From next week, Scoot will add five flights a week to the Gold Coast. It will also operate services to a number of Asian cities starting with Bangkok, and Tianjin in China, with plans to fly to Tokyo and Taipei later in the year.


Got a question about this story? Leave it in Comments & Questions below.

This article is tagged with the following keywords. Find out more about MyNBR Tags

Comments & Questions

Commenter icon key: Subscriber Verified

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.6750 0.0000 0.00%
AUD 0.9373 -0.0010 -0.11%
EUR 0.6057 -0.0007 -0.12%
GBP 0.4619 -0.0001 -0.02%
HKD 5.2435 -0.0002 -0.00%
JPY 74.2850 -0.0760 -0.10%

Commods

Commodity Price Change Time
Gold Index 1229.2 -19.340 2016-05-24T00:
Oil Brent 49.2 0.250 2016-05-24T00:
Oil Nymex 48.6 0.540 2016-05-24T00:
Silver Index 16.2 -0.170 2016-05-24T00:

Indices

Symbol Open High Last %
NZX 50 6873.8 6924.7 6872.7 0.60%
NASDAQ 4792.9 4866.0 4765.8 2.00%
DAX 9798.9 10077.6 9842.3 2.18%
DJI 17525.2 17742.6 17492.9 1.22%
FTSE 6136.4 6231.9 6136.4 1.35%
HKSE 20156.8 20358.0 19830.4 2.49%
NI225 16764.3 16806.0 16498.8 1.67%