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Qantas in the red with confronting $2.8 billion loss

Qantas has posted a statutory loss of $2.843 billion for the year ending 30 June, a result even worse than market prediction pushing the airline into the red.

Qantas has posted a statutory loss of $2.843 billion for the year ending 30 June, a result even worse than market prediction pushing the airline into the red.

The airline’s CEO, Alan Joyce said the poor result, a decline of $566 million in revenue, was “unacceptable” and “confronting” but represents “the year that is past, and we have now come through the worst” with the airline expecting to see “accelerating benefits” in the coming year.

The costs associated with its $2 billion transformation plans announced in February, weaker demand due to lowered consumer confidence and reduced business activity from the mining and government sectors coupled with a record high fuel cost of $4.5 billion, up $235 million year-on-year, were reasons the airline attributed to the full-year loss before tax of $646 million.

Qantas also made a non-cash write-down of $2.6 billion to the carrying value of aircraft of the airline’s international operations, which will now be under a new holding structure.

“Following partial repeal of Qantas Sale Act foreign ownership limits, the decision has been made to establish a new holding structure and corporate entity for Qantas International to increase the potential for future external investment, and creates long-term options for Qantas International to participate in partnership and consolidation opportunities,” the airline said.

“Qantas has no intention to sell and intends to retain in its fleet,” the airline said, adding that the international fleet was purchased when the Australian-dollar averaged 68 cents against the US dollar.

“The structural decisions we announce today give the Group maximum scope to attract capital in a fiercely competitive international aviation market. Standing still while the world changes around us is not an option,” Mr Joyce said.

Qantas domestic and Jetstar domestic operations brought in earnings just below $50 million, offsetting a drop in revenue and were “in all likelihood, the only profitable airlines in the domestic market”.

Transformation benefits totalled $440 million according to the Group, which included $204 million of second-half benefits from the accelerated Qantas Transformation program.

“A further $900 million of accelerated transformation projects are in the implementation phase, with more than $600 million of benefits from these projects to be realised in FY15”.

With regards to its loyalty business, Qantas has confirmed it will not be partially selling off Qantas Loyalty and will instead “retain this highly valuable business within the existing Group structure”.

“It was determined that there was insufficient justification for a partial sale. Qantas Loyalty continues to offer major profitable growth opportunities”.

Qantas Loyalty, the airline’s biggest moneymaker, reported earnings before tax result of $286 million, up $26 million year-on-year.

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