Qantas trims orders and capacity to cut capital expenditure

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Australia's Qantas Airways is cancelling or deferring orders for 12 narrowbody aircraft, and cutting domestic capacity, to reduce capital expenditure over the next two years.

This is in response to "slower overall growth rates in the domestic market", said the airline.

The Oneworld alliance member is now targeting 5.5% domestic capacity growth for the 2011/12 fiscal year, down from the 8% it previously planned. Qantas uses a July-June fiscal calendar.

Australia's flag carrier expects to take delivery of 34 aircraft in the 2011/12 fiscal year, nine fewer than the 43 previously planned. Orders for 12 narrowbodies will be cancelled or deferred, including three aircraft in the six months to 30 June 2010.

jetstar a-320

Flightglobal's ACAS database shows that Qantas has orders for 23 Boeing 737-800s, while its low-cost subsidiary Jetstar has orders for 44 Airbus A320s.

The measures will reduce capital expenditure in the six months to 30 June by Australian dollars (A$) 100 million ($107 million), and reduce capital expenditure for the 2011/12 fiscal year by A$300 million, said Qantas. The reduction in planned leased aircraft commitments for 2011/12 will save the company another A$300 million.

Qantas chief executive Alan Joyce added that the measures will help "maximise the Qantas Group's competitive position in the domestic market".

"The Qantas Group has always taken decisive action to match capacity to demand," he said. "With Qantas continuing to lead the premium market and Jetstar offering consistently low fares in the leisure market, we are well-placed to retain our profit-maximising 65% domestic market share. Our extensive fleet renewal strategy will support growth and improve product for both airlines."

Qantas said that it would have a cash balance of more than A$3 billion this year, and it had the flexibility to reinstate or further reduce capital investment as appropriate. It reiterated that it has secured financing for its 2011/12 aircraft deliveries, and intends to fund the balance of its future capital commitments from operating cashflow, cash reserves and available debt.