Qantas Airways put its shares on a trading halt on Wednesday ahead of an update on its financial outlook, which sparked worries it was going to unload a profit warning that could knock its shares below two-year lows.

Analysts said with the profit reporting season coming up, if the company was aware it was going to miss market forecasts by more than 10 percent, it had to inform investors.

It worries me. I can't think of anything else it could be, said Will Seddon, an analyst at White Funds Management.

Last week Qantas announced A$700 million in spending reductions, cutting its domestic capacity growth to 5.5 percent, down from an earlier target of 8 percent.

With pilots threatening strike action, costs soaring and the Australian economy going through a soft patch, Qantas has been under pressure to take decisive action, with some analysts suggesting its credit rating could come under pressure.

Seddon said a profit warning could bolster Qantas's bargaining position with pilots' unions.

It helps their cause...if they can remind people that they're currently not making a whole lot of money, he said. The timing's fairly convenient if you're trying to not give too much away in this kind of a negotiation.

The airline has already offered cabin crew voluntary redundancy in the hopes of cutting 350 jobs and has raised domestic and international fares several times with its fuel bill having soared to A$3.7 billion.

In the ten months to end-April, total passenger numbers at the Qantas group rose by 8.1 percent but the bulk of that increase was produced by budget arm Jetstar while Qantas international passenger numbers grew just 1.9 percent, Qantas said earlier.

The Sydney Morning Herald said Qantas Chief Executive Alan Joyce would outline a structural shake-up of the airline on Wednesday to try and reverse losses on international flights.

Speculation has centered around Qantas planning to set up a budget airline based in Singapore which would not have Qantas branding as it battles waning demand, soaring fuel costs and aggressive competition from Virgin Australia .

(Reporting by Sonali Paul; Editing by Balazs Koranyi)