UPDATE 3.00pm The Qantas Group will cancel 35 Boeing 787 planes worth $8.5 billion as lower demand and higher costs batter the airline.
This morning Qantas announced a profit before tax of $95 million for the year ended June 30, 2012 but a statutory loss –its first loss since privatisation 17 years ago - after tax of $244 million on the back of huge losses in its international division.
Qantas International recorded a loss of about $450 million while Qantas and Jetstar’s domestic networks together delivered Underlying EBIT of about $600 million.
The airline group recorded record underlying results for Jetstar of $203 million and Qantas Frequent Flyer of $231 million.
Qantas said its result was severely impacted by record high fuel costs ($4.3 billion, up $645 million) and industrial action culminating in the grounding of the Qantas fleet ($194 million).
Qantas chief executive Alan Joyce said that operating conditions for the industry deteriorated significantly during the year, affecting most major airline businesses.
“There were also one-off costs of $398 million, which are not included in Underlying PBT, as the Group initiated a turnaround plan for Qantas’ international network and addressed its legacy cost base,” Mr Joyce said.
He said the group had launched the biggest transformation program since privatisation in extremely challenging circumstances.
“Qantas has been through an exceptional period in its history over the past 12 months,” Mr Joyce said.
While the Qantas Group is cancelling 35 787-9s it is still taking delivery of 15 smaller 787-8s for the Jetstar Group.
It is also retaining options for 50 787-9s and expects to take delivery of those planes from 2016.
Two unions representing Qantas staff - the Transport Workers Union and Australian and International Pilots Association said Qantas’ loss was due to poor management in the past two years.
Transport Workers Union national secretary Tony Sheldon blamed the net loss on the “disastrous management” at Qantas, which was privatised in the early 1990s.
Qantas has also cut a number of international routes recently, a trend Morningstar analyst Nachiket Moghe expects to continue.
"The international business will continue to shrink over time from where it is now,” he said.
Qantas’s domestic operations continued to be the airline group’s moneyspinner, generating about $429 million in 2011/12, broadly flat with 2010/11.
However, the division is expected to come under pressure as Virgin Australia and Tiger Airways increase flights and routes.
To protect its market share, Qantas and its discount carrier Jetstar will increase capacity by nine to 11 per cent in Australia in the first half of 2012/13.
The Centre for Aviation said yields - an industry term used to describe average airfares per passenger - which were already weakened in the local market, would continue to fall.
"Domestic overcapacity will show no signs of relenting,” it said in a research note.
No dividend was declared.
Qantas shares were 3 cents higher at $1.20.