International Drag On Qantas Group Profit

Qantas Group will post a pre-tax profit of $500m to $550m for the year to June 30 despite another disastrous performance from its international division, CEO Alan Joyce said today. “Considering the challenges, this is a very good result,” Joyce said.

He revealed that the international business would lose around $200m with worse expected next financial year.

“Qantas International … has achieved required returns only three times in the past 15 years,” he said.

“Clearly the situation is not sustainable (and) we will take the hard steps necessary to turn this airline around.”

He said flight disruptions caused by the Chilean volcano had already cost the carrier $21m.

He said disruptions due to the Chilean volcano had already cost the airline $21m, with more impacts expected.
He also confirmed a $95m settlement with Rolls Royce over the QF32 engine explosion last Nov, with this amount to be fully recognised in the FY11 result.
Other impacts were due to the “significant weather events and natural disasters” including the Queensland floods and cyclones and the earthquakes in Japan and Christchurch.
“Considering the challenges facing the aviation industry, this is a very good result – the Qantas Group’s best since the global financial crisis,” he added.
Joyce said the second half performance reflects the more challenging environment, with significantly higher fuel prices.
He said that the QF mainline international business was expected to generate a loss of approximately $200 million, on invested capital of over $5 billion, with a weaker result expected next year.
“Qantas International is the Group’s weakest business – it has achieved required returns only three times in the past 15 years. Clearly the situation is not sustainable. However, we are developing a long-term strategy aimed at restoring competitiveness and profitability,” Joyce said.
“We will take the hard steps necessary to turn this airline around,” he said, with the outcome of a review of QF International progressing in line with expectations, and plans for “strategic renewal” to be announced later this year.
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