The Qantas Group has recorded a massive post-tax loss of AUD2.8 billion for the 13/14 financial year.
The result comprised an underlying pre-tax loss of AUD646m and international fleet write downs of AUD2.6 billion.
CEO Alan Joyce said key factors in the poor result were:
- The cumulative effect of two years of market capacity growth outstripping demand.
- A record high fuel cost of $4.5 billion, up $253 million on the prior year.
- Weaker demand due to an environment of lower consumer confidence, with reduced activity by business, particularly the mining and government sectors.
- The costs associated with our AUD2 billion Qantas Transformation program, including redundancies and early aircraft retirement, and
- A non-cash write-down of AUD2.6 billion to the value of the Qantas International fleet, following our Structural Review.
“There’s no doubt that today’s numbers are confronting,” Mr Joyce said.
“But they represent the year that is past, and we have now come through the worst.”
“The changes arising from the Structural Review will deliver significant short and long-term benefits.
“Importantly, there is a clear and significant easing of both international and domestic capacity growth, which will stabilise the operating environment.
“We therefore anticipate a rapid improvement in the Group’s financial performance in financial year 2015.
“The Qantas Group expects to deliver an underlying profit before tax in the first half of the year, subject to factors outside our control.
He said Qantas Domestic and Jetstar Domestic were profitable with earnings of just below AUD50 million- “in all likelihood, the only profitable airlines in the domestic market”.
“Revenue declined relative to the prior year, due to a second consecutive year of market capacity growth well ahead of demand.
“Qantas International is transforming at speed, with
$400 million of costs removed over the past two years.
“However, these achievements were offset over the same period by revenue decline, again due to competitor capacity growth running well ahead of demand, and fuel cost increases.
“Earnings recovery in Qantas International will continue to be driven by removing costs from the business, and the easing back of capacity oversupply.
“The Jetstar Group delivered a two per cent unit cost improvement and business fundamentals remained strong.
“However, due to competitive intensity and capacity oversupply in Australia and South East Asia, yields were adversely affected.
“Qantas Loyalty recorded its fifth straight year of double-digit earnings growth – another record result in a great business.”
In an update on the Qantas Transformation program, Mr Joyce said: “The measures announced in February led to significant redundancies, of which 2500 have taken place.
“By the end of full year 2015, 4000 of the total 5000 redundancies will have occurred.
“The 5000 redundancies will conclude the period of major job reductions.”