Qantas prepares shareholders for tough half

Qantas prepares shareholders for tough half
By admin

Yields are expected to decline for the Qantas Group in the first half of the 2014 financial year as fuel costs hit a new high, chief executive Alan Joyce has warned.

Speaking at the Qantas annual general meeting in Brisbane on Friday, Joyce described spiraling fuel prices as a “massive cost impact” expected to particularly hit the group’s international operations.

“Group fuel costs will be a record for any half-year,” he said.

A glut of domestic capacity introduced to the market in recent times as the rivalry between Qantas and Virgin Australia gathered momentum also continues to take its toll.

“The domestic market is still absorbing capacity growth that has been double the long-run average,” he said "And this growth has come at the same time as weak underlying demand across the market, from the leisure to corporate segments.”

Meanwhile, a shift in the Australian economy is impacting a number of the airline’s corporate clients. Business confidence is improving, he admitted, but the effect of that will take some time to be seen.

“As a result of this weak underlying demand and competitive pressures both domestically and on international routes, we expect group yields to decline in the first half of financial year 2014 by between 2% and 3% compared to the first half of financial year 2013,” Joyce said.

He declined to provide earnings guidance given the “volatility” of the current climate.

“There are many factors that we cannot control, and the immediate challenges they present are real,” he said.

However, Joyce insisted that despite these hurdles, the future of the Qantas group remains bright as it continues its transformation.

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