An Australian Government bail out and asset sales are not going to help Qantas back into the black in the near term, according to a leading research company.
In a new client report, JP Morgan is forecasting losses at Qantas for the next two years, kicking off with $289 million of red ink for the six months to December 31.
That result would be a 230 per cent reversal in fortune in just 12 months. Full-year forecasts are for a pre-tax loss of $605 million.
Qantas is seeking Government help, in the form of guarantees or ownership changes, to blunt competition from Virgin Australia, which has raised $350 million with help from its foreign airline investors.
JP Morgan says "although it would be nice to think that selling assets and/or the Government changing the ownership restrictions or guaranteeing new debt would solve Qantas's problems, these initiatives are unlikely to change the current diffi- cult operating environment."
JP Morgan says Virgin will continue to actively seek to increase its domestic market share, with Qantas's core profit centres such as the domestic business market under attack.
JP Morgan suggests the embattled airline should sell its terminals to raise up to $1 billion.
A Qantas spokesman said that "earnings conditions have deteriorated rapidly in recent months and we now face some of the most challenging circumstances in our history, including an uneven playing field in Australian aviation." Qantas will provide an update on a structural review in February as part of its half-year results.
Qantas shares finished up 1Â¢ at $1.11.