Qantas Airways Ltd
Qantas, which like many other airlines is suffering from the global economic downturn, also said its full-year pre-tax profit may be down as much as 80 percent from a previous estimate. The surprise announcement pushed its shares down 11 percent early, but they rebounded to rise 2 percent in a firm overall market.
People see the worst is over for at least the fiscal 2009 year and at this stage they can't possibly disappoint on that revised guidance, said Brian Han, an investment analyst at Australian fund manager Constellation Capital Management.
Many airlines, worldwide, have announced job cuts to reduce costs, with British Airways BA
We have faced accelerated declines in passenger demand and revenue while market competition has intensified, Qantas Chief Executive Alan Joyce said in a statement.
The airline now expects profit before tax of between A$100-200 million ($73-146 million) for the year ending on June 30, down from around A$500 million it had forecast in November. It cited a rapid and significant deterioration of trading conditions in the past few weeks.
In the first half ended December 31, Qantas reported a profit before tax of A$288 million. That would mean it is expecting a pre-tax loss of as much as A$188 million in the second half. Qantas confirmed it was expecting a second-half pre-tax loss.
Ratings agency Standard & Poor's cut its corporate credit ratings on Qantas to 'BBB/A-3' from 'BBB+/A-2'.
The downgrade reflects our view that Qantas' financial profile will come under significant pressure from the significant deterioration of trading conditions in the airline industry, S&P said in a statement.
Qantas's five-year credit default swaps, which offer protection against defaults on debt, were quoted in thin trade at around 240 basis points on Tuesday, largely unchanged from previous levels, according to traders.
World airlines are set to lose $4.7 billion this year as a result of the global downturn that has shrunk passenger and cargo demand, industry body The International Air Transport Association (IATA) estimated at the end of March.
On Monday, shares in Boeing Co
Qantas said it would defer aircraft orders for four Airbus
The airline said it would reduce capital expenditure by at least A$800 million in 2009/2010, lower flying capacity by a further 5 percent and axe another 1,750 jobs, or about 5 percent of its 34,000 staff. The cuts include 500 management positions.
Last month, Qantas announced it would shed 90 top management positions, adding to 1,500 job cuts announced last year.
In terms of overall business traffic, we are seeing a drop of somewhere between 15 and 20 percent, depending on the route, Qantas Chief Financial Officer, Colin Storrie, told a news conference.
Analysts welcomed the steps Qantas was taking but said it would be a long grind.
Doing nothing is not an option in an environment like this...but it's still going to have to work quite hard to deliver it, said Michael Maughan, senior analyst at Australian fund manager Tyndall Investment Management.
Qantas shares fell to an early low of A$1.74, but erased the losses to end up 2.0 percent at A$2.0, while the benchmark S&P/ASX 200 index <.AXJO> rose 2.2 percent. The shares have lost about a quarter of their value so far this year, compared with the benchmark index's 0.8 percent gain.
($1=1.370 Australian Dollar)
(Editing by Muralikumar Anantharaman)