Qantas posts big loss, cancels Dreamliner orders

Qantas Airways cancelled a large order of Boeing 787 Dreamliners after reporting its first loss as a privatised company.

The net loss of $A244 million in the year to June 30 was worse than expectations and compared with a $A249 million profit last year.

The airline says cancelling 35 orders for new generation Dreamliners, which are destined for the discount Jetstar subsidiary, will cut capital expenditure by more than $A8 billion.

However, its initial order of 15 B787-9 long-range aircraft due in the second half of next year will go ahead.

Qantas expects conditions in the aviation market in the first half of next year to remain challenging, volatile and dependent on a number of uncontrollable external factors, such as fuel prices and exchange rates,

But it hopes to maintain its dominant 65% share of the Australian domestic market and says that given current market conditions its domestic capacity is expected to rise by 9-11% in the first half of next year.

Overall capacity, which reflects additional flights or bigger aircraft, will rise 3-4% in the same period.

As expected, the airline’s international operations made a loss of $A450 million.  But Qantas Domestic and Jetstar delivered a profit of more than $A600 million on the same basis.

Annual revenue and other income rose 5.6% to $A15.724 billion. The group has again skipped on a dividend.

Chief executive Alan Joyce says the turnaround strategy for the international operation is producing results, with a return to a  positive cashflow in the second half.

This has involved refurbishing of existing aircraft and the cutting of some routes, such as Auckland-Los Angeles..

His statement also noted some of the headwinds th airline faced:

• an 18% rise of $A645 million in the fuel bill to a record $4.3 billion;

• industrial dispute costs of $194 million, including a grounding of the entire fleet; and

• transformation costs of $A376 million, half of it non-cash.

Looking ahead, he says total fuel costs are expected to rise to $2.3 billion in the first half of the current year.

"We have a very successful two-airline strategy in Australia, with a premium and low fares model that spans most aviation customers and mitigates risk over economic cycles," he adds.

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2 Comments & Questions

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I have an airline background and honestly, I do not think I would ride on the new 787..too many glitches need fixing, before I would even think about flying on one !!

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All Nippon and JAL obviously disagree, FAA certification does not come easily.

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