Despite 41.6% profit drop and poor international revenues, airline predicts full-year profit

Qantas chairman Margaret Jackson is claiming financial performance "better than just about any airline in the world", with an after-tax profit of A$153.5 million ($79 million) for the six months to December 2001.

The figure is 41.6% down on the same period a year ago, however, following a sharp drop in earnings from international services after 11 September. The collapse of Ansett and Qantas's subsequent 27.4% increase in domestic traffic failed to compensate for the loss in international business.

Despite the profit drop, Qantas forecasts full-year profits in line with last year's pre-tax profit of A$550 million. Profit before tax was A$231 million on revenue of A$5.7 billion.

Chief executive Geoff Dixon says the result was achieved despite slowing Australian and international economies at the beginning of the period, a weak Australian dollar and soaring jet fuel prices. "Added to this was the heavy discounting in the domestic market, which saw two of the four domestic airlines collapse," he says.

Dixon says demand for international travel fell by up to 30%on some key routes after 11 September. Profits were also hit by Qantas's commitment to carry 115,000 stranded Ansett passengers at no charge or at small fares following its collapse last September.

"The sharp decline in the profitability of our international operations far outweighed the increased profitability of our domestic operations after the collapse of Ansett," says Dixon. "Domestic operations contributed A$180.1 million in EBIT [earnings before interest and tax], an increase of A$62 million."

Dixon says trading in the first six weeks of 2002 indicated Qantas should deliver a full-year profit before tax in line with last year's result. "But this could prove difficult if there is further volatility in the market," he says. "There are signs of increased demand for international travel in some markets. This is predominantly in the leisure sector, however, and is impacting on yields."



Source: Flight International