Second-highest profits ever give airline opportunity to expand products and services

After bringing in near-record results, Qantas plans to take advantage of its improved share price by raising A$800 million ($436 million) in a rights issue. Qantas plans to use the capital raised to build its domestic and international low-cost products, upgrade its fleet and buy a stake of up to 25% in Air New Zealand (ANZ).

The carrier's profits of A$631 million before tax, on revenue of A$11.3 billion in the year to June 2002, compared with A$597 million pre-tax profits on A$10.2 billion sales the previous year, are the second highest in its 82-year history.

International operations returned only a A$208 million profit, against A$459 million for the previous year. But, boosted by the collapse last year of domestic rival Ansett, earnings on domestic operations before interest and tax rose from A$171 million to A$298 million.

However, chief financial officer Peter Gregg says Qantas domestic operations in New Zealand have returned "a negative contribution". Chief executive Geoff Dixon plans to change this by boosting capacity: "We haven't got, I believe, a big enough presence [in New Zealand] to give us a profitable result, but we're addressing that."

Part owner British Airways has indicated it would not participate in the rights issue, but Dixon expects the relationship to remain strong. He says: "Depending on how much money we raise, they'll [BA] go down to 17% to 18% [from 21% now]... They continue to tell us that for the current or foreseeable future they are going to retain their stake in Qantas."

Local reports suggest the offering could be priced at A$4.20. Trading in Qantas shares was halted last week for three days after the board meeting, but was scheduled to resume on 23 August.

Dixon says that negotiations between Qantas and ANZ on Qantas' proposal to acquire a stake of up to 25% are "very, very cordial and constructive...but no decision has been made and no decision is pending within the next few days or the next few weeks". 

Money from the rights issue will also support fleet-development plans. Qantas has outstanding firm orders for 35 new aircraft, including Airbus A330s, A380s, Boeing 747-400ERs and Boeing 737-800s.

Internationally, Qantas will focus on nascent low-cost international leisure carrier Australian Airlines, and domestically on a new all-leisure widebody product within the existing airline.

Source: Flight International