Shares in Qantas dived as much as 18% to an all-time low after the airline warned profits would fall by up to 90%.
The Qantas Group’s profit update, published today, announced the airline expects to report an underlying profit before tax in the range of $50-$100 million for the financial year ending June 30, 2012.
The international arm of Qantas’ business, Qantas International, is expected to report an earnings before interest and tax loss of over $450 million in 2011-12 compared with $216 million in 2010-11.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
Qantas said structural issues in the business have been compounded by the impact of global economic factors – including increased fuel costs, the high Australian dollar and weakness in the UK and Europe market – as well as the $100 million one-off cost of industrial action.
On the back of the announcement, the airline’s shares plunged to an all-time low of $1.16.
Qantas Group chief executive Alan Joyce said Qantas was attacking costs and allocating aircraft and capital efficiently to make improvements in the business.
“While there are one-off costs associated with the transformation program – in the range of $370- $380 million for the full year 2011-12, more than half of which are non-cash items – these costs will be outweighed by the long-term benefits of increased efficiency and competitiveness,” Joyce said in a statement.
“We continue to practise disciplined financial management. We have announced capital expenditure reductions totalling $900 million for 2012-13, bringing the total for the year down to $1.9 billion. Capital expenditure in 2013-14 will be at this level or lower.”
Hastie sells subsidiaries and saves 400 jobs
Failed engineering business the Hastie Group has sold two of its subsidiary firms, which will allow more than 400 workers to stay in their jobs.
The voluntary administrator for the Hastie Group has today announced it has sold the two firms, Cooke and Carrick, a hydraulics specialist, and D&E, an air conditioning specialist.
Cooke and Carrick is based in Tullamarine and employs 134 people while D&E, from Rowville, provides air conditioning and mechanical services, and employs 274 people.
Australian stock market bounces back
The Australian stock market has opened stronger, breaking back through the key 4,000 point level, following a massive sell-off in the previous session and mixed results on Wall Street overnight.
At the official market open, the benchmark S&P/ASX 200 index gained 1.26% to 4,035.6 points, while the broader All Ordinaries Index rose 1.20% to 4,082.2 points.
Ric Spooner, chief market analyst at CMC Markets, said international risk markets generally held the line last night and the Australian market was likely to do the same prior to this afternoon’s RBA announcement.
“Australian investors will focus on the RBA rate decision this afternoon. If there is no rate cut, we may see a minor sell off, although this is likely to be tempered by the expectation that the Reserve will cut if conditions continue to deteriorate in coming months,” he said.
Dollar rises slightly
The Australian dollar has risen slightly after official data showed the national deficit was broadly in line with expectations in the first quarter.
Australia reported a seasonally adjusted current account deficit of $14.892 billion in the March quarter, the Australian Bureau of Statistics said.
The median market forecast was for a deficit of $14.650 billion in the quarter.
The deficit on goods and services in chain volume terms (adjusted for price changes) increased $1.816 billion, which would detract 0.5 percentage points from growth in the March quarter measure of GDP , the ABS said.
The dollar was trading at US97.58 cents at 11.25, before the data was released, and had risen to 97.67 cents by 12pm AEST.