Qantas Airways Ltd, Australia's largest airline, will cut flights, force workers to take leave and freeze some spending because the risk of war in Iraq reduced bookings, threatening its full-year profit forecast.
The airline's shares fell 11.6 percent after Chief Executive Officer Geoff Dixon told reporters bookings have "slowed considerably," making the target "more difficult to achieve."
Qantas didn't reveal its full-year target. First-half profit more than doubled to a record A$352.5 million.
PHOTO: AP
Qantas, Deutsche Lufthansa AG and other airlines are cutting back on services and routes as the US prepares to invade Iraq this year after many reported losses and United Airlines filed for bankruptcy last year.
Qantas is "talking about big drops in international passenger volumes," said Shawn Burns, fund manager at Deutsche Asset Management Ltd, which has Qantas stock in its A$13 billion of investments.
The airline's shares fell A$0.44 to A$3.36, its biggest fall since Sept. 17, 2001. More than 33 million shares changed hands, nearly 5 times the daily trading average the past six months, making it the most actively traded stock in Australia by value.
The yield on Qantas's 7.25 percent bond due in October 2007 narrowed to 95 basis points more than the benchmark swap rate from 99 basis points more yesterday.
Forced vacations
Qantas will force some of its 35,000 employees to take accumulated vacation between now and June 30, which is equivalent to eliminating 1,500 jobs, Dixon said. Some spending will be frozen and flights pared back, he said without giving details.
Bookings on routes to Japan and the UK have fallen as much as 20 percent, Dixon said. It will probably retire some leased aircraft and may postpone the delivery of new aircraft to lower the impact of reduced demand, Dixon said.
"If tensions continue around Iraq and terrorism, bookings could further deteriorate," Dixon said. "In such an environment, our profit target would certainly become more difficult to achieve."
Lufthansa and affiliates will idle 46 planes in "coming weeks," 10 more than announced earlier, reduce investment by 200 million euros (US$215 million) and stop hiring immediately, a spokeswoman, said yesterday.
KLM Royal Dutch Airlines NV said two weeks ago it would pull planes from service.
Qantas earnings rebounded from a 42-percent slump in net profit to A$153.5 million (US$90.5 million) in the same period last year, which Qantas blamed on a steep decline in international tourism following the Sept. 11 terror attacks in the US and a rise in fuel costs.
Qantas said revenue for the six months ended Dec. 31, 2002, rose 9.3 percent to A$5.88 billion (US$3.5 billion) from A$5.38 billion (US$3.17 billion).
"We expect to improve our margins going forward as we continue to roll out our strategy to operate all-economic class aircraft on leisure routes that have little or no demand for business travel," said CEO Geoff Dixon.
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