What can Qantas do about its massive losses – the doors are now wide open for a “rescue” deal with Emirates
Things are getting pretty bumpy over at Qantas HQ in Mascot, with the flying kangaroo this week reporting an even worse than expected loss of $245 million for the full year, compared to a $250 million profit the year before.
The market is reported to have expected Qantas to post a net loss of $224 million for the year, with the massive $245m loss the first since the airline was privatised 17 years ago expected to hit Qantas share prices even further.
Qantas CEO Alan Joyce said in a briefing that the result reflected three things, a record fuel bill, up $645 million to $4.3 billion, 18% higher than the previous year, the costs incurred by the prolonged industrial dispute last year of $194 million, and transformation costs of $376 million (approximately half of these non-cash), as the airline continues to address our legacy cost base and turn around Qantas’ international business.
He explained, “As previously disclosed, Qantas International made a loss of approximately $450 million (based on underlying earnings before interest and tax), however Qantas Domestic and Jetstar Domestic combined delivered a profit of more than $600 million by the same measure.
Joyce also announced that Qantas is cancelling firm commitments to purchase 35 Boeing 787’s to reduce capital spending by $US8.5 billion/$A8.1 billion.
So, where does all this leave Qantas in terms of the massive drag its international operation has become on the airline’s overall business, and the profitability of its domestic and Jetstar operations, both highly profitable?
Well, we all know that Qantas is separating its loss making international business from its profitable domestic operation, slashing its capital spending, chopping routes that lose money and slashing nearly 3,000 jobs…..but hang on, enter Qantas’ knight on a white horse or at least a knight or actually sheik wearing the dishdash [the long white robe worn by men in arab countries and the headscarf, the keffiyeh!]… aka Emirates!
If you have any doubts about the future demise of Qantas international as we know it and the acquiring of a fair chunk of Qantas domestic by Emirates, then check out what I said in July by clicking on the link to this article and draw your own conclusions on whether you think my predictions are coming true:
An Industry Insider Commentary and Opinion by John Alwyn-Jones