Qantas ditches order amid profit loss

Qantas ditches order amid profit loss
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Qantas has cancelled firm orders for 35 787-9 Boeing aircraft as the carrier plunged $244 million into the red, its first full year loss in almost 20 years.

Despite a strong domestic performance and record frequent flyer results, the group was battered by a $450m loss in its international division, a rising fuel bill of $4.3 billion and industrial action which cost $194m. The loss compared to a statutory profit in 2011 of $250m.

The cancellation of the 787-9 aircraft, which have a list price of US$8.5b, will see delivery of the Dreamliner -9 version delayed by two years. Fifty options and purchase rights will become available to Qantas from 2016.

But chief executive Alan Joyce said the arrival of 15 B787-8s to Jetstar will proceed as normal with the first aircraft to arrive in the second half of next year.

The decision to cancel the order follows “lower growth requirements” and a need for “disciplined capital management”, Joyce said.

“In the context of returning Qantas International to profit, this is a prudent decision,” he said.

The transformation of its international flying is “on track” to make a profit within three years, Joyce added, with alliance talks continuing with “a range of carriers”, including Emirates.

But he declined to elaborate on the progress of discussions.

Its domestic Qantas and Jetstar business made an underlying profit of $600 million with Qantas again underlining the importance of maintaining its 65% “profit maximising” market share. Domestic capacity will rise between 9% and 11% in the first half of the current financial year to protect its position, Joyce said.

Turning to the outlook, Joyce said global market uncertainty will continue. He said it would be “imprudent” to offer profit guidance in light of “volatility in global conditions, fuel and foreign exchange rates as well as the ongoing internal transformation we have underway”.

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