Qantas shares dip as passenger traffic drops

The Australian reports that analysts expect Qantas to cut more flights amid weakening traffic and warnings that tourism is being hit by the global downturn.

The airline’s shares fell 15c yesterday to close at $2.69 as more predictions of continued gloom emerged and September traffic figures showed falls in passenger numbers in Qantas mainline operations and the percentage of seats.

Cathay Pacific chief executive Tony Tyler told an airports conference in Perth that the expected a rebound from the current crisis could last longer than expected.

“Sadly, the bad times are back and there’s no point pretending otherwise,” Mr Tyler said. “And this time I think we all should be concerned that the rebound may take somewhat longer than it did 10 years ago (during the Asian economic crisis), or indeed after other shocks like 9/11 and the SARS crisis.”

The Tourism and Transport Forum warned that international arrivals were falling and the trends were likely to continue.

ABS statistics released yesterday show overseas arrivals for September were down 7.6 per cent compared to a year ago. The decline affected all five of Australia’s top five inbound markets.

Arrivals from Britain were down 6 per cent, while arrivals from the US were down 13 per cent.

“TTF’s own quarterly research shows that the Australian tourism industry is in for a tough time — confidence among tourism operators for the next six months, and for the New Year in particular, is low,” said TTF executive director Olivia Wirth.

“Furthermore, a new report from the UN World Tourism Organisation shows that global tourism growth has slowed during 2008, with the Asia-Pacific region suffering the brunt of the downturn.”

Qantas mainline September traffic figures also showed a sharp downturn in international passenger numbers, although yield increased by 6 per cent.

Qantas international passenger numbers fell 9.3 per cent compared to last September, while mainline domestic passenger numbers were down 3 per cent for the month. Load factors on both mainline operations fell — by 1.7 points to 80 per cent on domestic and 3.6 points to 80.3 per cent on international — as the traffic fell more quickly than capacity.

Jetstar and Qantaslink both saw increases in overall passenger numbers and traffic, but also suffered falls in load factors as this was overshadowed by increases in capacity.

The exception was Jetstar International, which saw load factors rise from 68.9 per cent to 76.4 per cent.

Despite the weakness, analysts continued to see Qantas as a good value, but potentially risky, buy. “We still believe there is a high degree of risk around earnings estimates with potential further cuts to capacity,” said Citi Smith Barney.

“It is still too early to call the bottom of the downgrade cycle just yet.”

Credit Suisse said the airline had largely recovered from mid-year industrial action, but cited management comments about the weakness in forward bookings, the weak Australian dollar and the increasing contribution of Jetstar as catalysts for “a challenging yield environment” for the rest of the financial year.

“Consequently, we increasingly expect further capacity cuts to be announced at the upcoming AGM … by outgoing CEO Geoff Dixon,” it said.

A Report by The Mole