Qantas in the money, but overall outlook weakens
SYDNEY – The money just keeps rolling in for Qantas.
CEO Geoff Dixon said today Qantas Group’s profit before tax for 2007-2008 was now expected to be around 40 percent higher than last year.
Qantas in August had predicted that its profit for the current financial year would be around 30 percent higher than the previous year’s result of A$1,032 million.
“Since then Qantas’ operating businesses have continued to perform strongly, with the results for the first five months of 2007/08 above forecast and the forward booking profile also remaining robust,” Dixon said.
“This outlook remains subject to no significant deterioration in operating conditions including fuel prices and currency exchange rates.”
Elsewhere, the International Air Transport Association (IATA) has flagged a downturn in the outlook for the aviation industry.
IATA sharply revised downward its global industry profit for 2008 to US$5bn from the previously forecast US$7.8bn.
The spike in fuel prices is expected to add US$14bn to the industry fuel bill, driving it up to US$149bn (based on an average price of US$78 per barrel).
The broadening impact of the credit crunch is expected to slow revenue growth to 4.7 percent and traffic growth to 4.0 percent. Simultaneously, capacity expansion is expected to accelerate in 2008 with an increase in aircraft deliveries to 1,281 (up from 1,041 in 2007).
“The challenges get tougher in 2008,” said Giovanni Bisignani, IATA’s director general and CEO.
IATA said a favourable economic environment and effective efficiency measures helped mitigate the impact of high fuel prices and underpinned profitability improvements. With the credit crunch, that is changing.
“The peak of the business cycle is over and we are still US$190bn in debt. So we could be heading for a downturn with little cash in the bank to cushion the fall,” said Bisignani.
– While leading in absolute profitability in both 2007 and 2008, North American carriers will see the largest fall in profitability from US$2.7bn in 2007 to US$2.2bn in 2008. With 35 percent of the fleet over 25 years old, the impact of high fuel prices is greater than in other regions. Moreover, the region is at the centre of the credit crunch.
– European and Asian carriers will see minor drops in profitability of US$100m each to US$2.0bn and US$600m respectively. Robust traffic growth to and within Asia is expected to partially insulate carriers from the impact of the crunch.
– Profitability for Middle East carriers will remain stable at US$200 million supported by ambitious route expansion.
IATA has released a new industry financial forecast estimating a global industry profit of US$5.6bn in 2007
“For the first time since 2000, we are profitable,” said Bisignani. “That is good news, representing a lot of hard work by airlines. Since 2001, non-fuel unit costs dropped 16 percent, labour productivity is up 64 percent and sales and marketing unit costs decreased 25 percent.
“But with a 1.1 percent margin, the bottom line is still peanuts,” he stressed.
Ian Jarrett
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