Shares of Qantas Airways have hit a record low after the Australian flagship carrier forecast a drop of more than 90 per cent in full year earnings on the back of steep losses in its international arm.
The embattled carrier's shares plunged as much as 18 per cent to an all-time low of A$1.16 before recovering some ground to be down 15 per cent midway through the trading session on Tuesday.
The stock price has shed 40 per cent in value in the past 11 months.
"We have taken decisive action to mitigate losses in Qantas international by withdrawing from loss-making routes"
- Alan Joyce, Qantas chief executive
In a statement to the stock market, the carrier blamed a deterioration in global operating conditions driven by the European economic crisis and its highest ever jet fuel bill.
"The forecast result reflects the recent deterioration in global aviation operating conditions driven by the European economic crisis, the group's highest ever jet fuel bill, and substantial capacity increases in the domestic market that have reduced yields," Qantas said in a statement.
Qantas' international business is expected to post a loss of more than A$450m, over the double loss of A$216m in the last financial year.
The carrier is set to post its first annual net loss since it was privatised in 1995.
In contrast, its far healthier domestic unit and low-cost offshoot Jetstar was expected to book a combined profit exceeding A$600m.
Battle with unions
A soaring Australian dollar and a bitter battle with unions over wages and conditions that saw chief executive Alan Joyce ground the entire fleet for 48 hours in October also cost the airline dearly.
"We remain focused on returning Qantas international to profitability in 2014 and for Qantas international and domestic combined to exceed their cost of capital on a sustainable basis within five years of August 2011," Joyce said.
In a bid to halt the dramatic slide in profits, Joyce last month announced Qantas would split its international arm from its domestic operations.
Each of the two entities, currently combined as Qantas Airways, will run as separate businesses from July with their own chief executives and reporting of financial results.
The move came just days after Joyce said 500 jobs would be axed in Qantas's heavy maintenance and engineering operations.
"We have taken decisive action to mitigate losses in Qantas international by withdrawing from loss-making routes, reducing capital investment, and transforming Qantas engineering," Joyce said on Tuesday.
He added that the carrier, which has retired most of its old aircraft, had a cash balance of more than A$3bn and "remains in a strong funding position".
|< Prev||Next >|
Other articles in Business
US jury awards Apple $290m in Samsung retrial 22 November 2013
US bank in record $13bn settlement 20 November 2013
Emirates inks huge deal for new airliners 17 November 2013
Vietnam banker sentenced to death for fraud 16 November 2013
JPMorgan reaches $4.5bn deal with investors 16 November 2013
Obama offers fix to healthcare policy 14 November 2013
Italy alleges Apple hid $1.3bn from taxman 13 November 2013
EU leaders vow to tackle youth unemployment 12 November 2013
China pledges bigger role for free market 12 November 2013
Sudan devalues currency amid economic crisis 11 November 2013
|William A. Cook|