Qantas sees 13% fall in first-half profit, shares tumble

A Qantas Airways Airbus A330-300 jet takes off from Sydney International Airport over the city skyline, on Dec 18, 2015.
A Qantas Airways Airbus A330-300 jet takes off from Sydney International Airport over the city skyline, on Dec 18, 2015. PHOTO: REUTERS

SYDNEY (REUTERS) - Australian flagship carrier Qantas Airways Ltd said on Monday (Oct 31) it expected underlying first-half net profit to fall up to 13 per cent due to declines in international airfares, sending its shares sharply lower.

In a first-quarter earnings update, Qantas said it expected underlying profit before tax of between A$800 million ($607 million) and A$850 million (S$845.2 million) for the six months to Dec 31, 2016, compared with A$921 million for the same period a year earlier.

Its shares fell up to 9 per cent in early trading, while the broader market was flat.

"Like most carriers globally, we are seeing international airfares below where they were 12 months ago," Qantas Chief Executive Officer Alan Joyce said in a statement. "The impact of that is tempered by the competitive advantages we've been working hard to fortify, including our strong domestic position and diversified loyalty business."

After ending a domestic price war two years ago, Qantas and No 2 Australian carrier Virgin Australia Holdings Ltd are facing even stiffer competition globally, spurred on by lower fuel prices and sagging demand linked to global political instability.

Both have said they plan to use aggressive cost-cutting programmes and new routes in China and the United States to grow earnings.

Qantas did not break out revenue from individual routes on Monday but said new international routes had "lowered average international unit revenue during their ramp-up phase".

It said overall revenue fell 3 per cent to A$3.98 billion in the three months to end-September, while international unit revenue fell 6.9 per cent.

While Qantas shares fell, Virgin shares rose 1 per cent in early trading.