Qantas slashes profit estimate, plans mass job cuts
By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) -- Qantas Airways said Tuesday it is cutting its fiscal 2009 earnings expectation by as much as 80% and plans to lower its flying capacity, reduce spending and eliminate up to 1,750 jobs in response to a major slump across the air travel industry.
"Market conditions have deteriorated, especially in our international business," said Chief Executive Officer Alan Joyce. "We are experiencing significantly lower demand, particularly in premium classes, and considerable price pressures with extensive sales and discounting by all carriers."
The Australian flag carrier said it now expects its profit before taxes to fall to a range of A$100 million to A$200 million ($72 million to $145 million), compared to its previous forecast of A$500 million.
In the year ending June 2008, Qantas earned A$1.41 billion.
The new outlook "is subject to no further changes in market conditions, fuel prices, and volatility in hedge accounting results," Qantas said in a statement.
But Joyce added that, looking ahead, "Qantas expects the current volatility in operating conditions to continue for some time," and that "these volatile market conditions make it difficult to provide forecasts."
The company also said the capacity reductions and related restructuring will likely impact up to 1,250 full-time jobs, and it plans to remove an additional 500 management positions.
Qantas said it will minimize redundancies for the 1,750 positions by utilizing workforce initiatives, but "some redundancies will be unavoidable and will lead to additional restructuring costs in 2008/2009."
It said it also will reduce its flying capacity by around 5% and ground up to 10 aircraft.
Shares of Qantas (AU:QAN: news , chart , profile ) touched a low of A$1.74 before closing 2% higher at A$2, tracking the broader gains in Sydney, where Australia's S&P/ASX 200 finished with a gain of 2.2%.
Following the airlines' announcement Tuesday, Standard & Poor's Ratings Services lowered its corporate credit ratings on Qantas to BBB/A-3 from BBB+/A-2 and said its rating outlook on the company remains negative.
Moody's said its downgrade to Baa2 from Baa1 in February anticipated the reduced earnings outlook.
Myra P. Saefong is MarketWatch's assistant global markets editor, based in Tokyo.
TOKYO (MarketWatch) -- Qantas Airways said Tuesday it is cutting its fiscal 2009 earnings expectation by as much as 80% and plans to lower its flying capacity, reduce spending and eliminate up to 1,750 jobs in response to a major slump across the air travel industry.
"Market conditions have deteriorated, especially in our international business," said Chief Executive Officer Alan Joyce. "We are experiencing significantly lower demand, particularly in premium classes, and considerable price pressures with extensive sales and discounting by all carriers."
The Australian flag carrier said it now expects its profit before taxes to fall to a range of A$100 million to A$200 million ($72 million to $145 million), compared to its previous forecast of A$500 million.
In the year ending June 2008, Qantas earned A$1.41 billion.
The new outlook "is subject to no further changes in market conditions, fuel prices, and volatility in hedge accounting results," Qantas said in a statement.
But Joyce added that, looking ahead, "Qantas expects the current volatility in operating conditions to continue for some time," and that "these volatile market conditions make it difficult to provide forecasts."
The company also said the capacity reductions and related restructuring will likely impact up to 1,250 full-time jobs, and it plans to remove an additional 500 management positions.
Qantas said it will minimize redundancies for the 1,750 positions by utilizing workforce initiatives, but "some redundancies will be unavoidable and will lead to additional restructuring costs in 2008/2009."
It said it also will reduce its flying capacity by around 5% and ground up to 10 aircraft.
Shares of Qantas (AU:QAN: news , chart , profile ) touched a low of A$1.74 before closing 2% higher at A$2, tracking the broader gains in Sydney, where Australia's S&P/ASX 200 finished with a gain of 2.2%.
Following the airlines' announcement Tuesday, Standard & Poor's Ratings Services lowered its corporate credit ratings on Qantas to BBB/A-3 from BBB+/A-2 and said its rating outlook on the company remains negative.
Moody's said its downgrade to Baa2 from Baa1 in February anticipated the reduced earnings outlook.
Myra P. Saefong is MarketWatch's assistant global markets editor, based in Tokyo.
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