Qantas' share price has nosedived in the aftermath of the airline's announcement it expected its profits to tumble 90% on last year.
European economic uncertainty and soaring jet fuel prices saw the group downgrade its profit forecast for the financial year ended June 30, now projecting an underlying profit before tax in the range of $50 to $100 million, down from $552 million last year.
Qantas International is expected to turn in pre-tax losses of more than $450 million, confirming chief executive Alan Joyce’s prediction last year that tougher times were ahead, with the figure dramatically worse than 2010/11 losses of $216 million.
“The forecast result reflects the recent deterioration in global aviation operating conditions driven by the European economic crisis, the Group’s highest ever jet fuel bill, and substantial capacity increases in the domestic market that have reduced yield,” a statement said.
However, it underscored strong performances in the domestic market by Qantas and Jetstar, expected to delivery improved results on last year delivering combined earnings before interest and tax of more than $600 million.
Meanwhile, Joyce said the “tough and worsening” environment reinforced the importance of its five-year transformation plan unveiled in August.
“We have taken decisive action to mitigate losses in Qantas International by withdrawing from loss-making routes, reducing capital investment, and transforming Qantas engineering,” he said.
“The introduction of a new Qantas Group structure with dedicated CEOs for Qantas International and Qantas Domestic will bring further rigour to our business.”
At 2.40pm AEST, Qantas shares were valued at $1.17, down 17.61%, representing an all-time low.
