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Thu, May 08, 2003 - Page 12 News List

SARS saps Qantas' once healthy profit target, kills shares

BLOOMBERG , SYDNEY

Qantas Airways Ltd said sales on some routes dropped two-thirds as a deadly virus sapped travel demand, making the airline miss its own profit target and delay the delivery of planes. Its shares dropped as much as 5.6 percent.

Bookings on Australia's biggest airline to Hong Kong, where severe acute respiratory syndrome (SARS) has killed 193 people, are down 64 percent. Demand on flights to Australia from Europe, which stop in Hong Kong and Singapore, has slumped, denting sales at home because international visitors account for 15 percent of domestic sales. The airline also said it will cut more staff.

Qantas joins Cathay Pacific Airways Ltd and other airlines in delaying aircraft orders, making it harder for Boeing Co and Airbus SAS to meet delivery forecasts. The airline, which in March said full-year profit will miss analysts' estimates, didn't give details on orders for planes or its own profit forecast.

"It just highlights how tough the global airline industry is," said Dennis Tighe, who helps manage the equivalent of US$100 million at Allianz Dresdner Asset Management Australia Ltd, including Qantas shares. "The company has responded pretty much in the ways you'd expect them to, but these factors are outside their control."

Shares of Qantas were down A$0.13, or 4.3 percent, at A$3.06 at 1:32pm in Sydney. The stock has shed one-fifth of its value this year. Shares of Cathay, Hong Kong's only long distance carrier fell as much as 6 percent.

"The aviation industry is going through the most difficult period in its history," chief executive Geoff Dixon said in a statement to the Australian Stock Exchange.

Before the SARS outbreak, the airline was on track for a record A$594 million (US$381 million) profit, according to the average forecast of 14 analysts surveyed by Thomson Financial.

Qantas hasn't provided earnings forecasts for this financial year.

The airline also didn't say how many more jobs it may cut.

Qantas will cut more staff after it said in April it would eliminate 1,400 jobs, or 4 percent of its workers, and another 300 full-time employees would be moved to part-time jobs. It also said more people will be forced to take leave without pay.

Some aircraft will be retired and new plane deliveries will be deferred, Qantas said.

Airbus, the world's second-largest maker of aircraft, last month said it may not meet its goal of delivering 300 planes this year because the onset of SARS is causing Asian carriers to push back orders.

Qantas said ticket sales on Japan services fell by 30 percent while bookings from France, Italy and the UK had fallen 45 percent, 33 percent and 14 percent respectively. Declining demand for international travel to Australia has hurt domestic ticket sales.

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