Qantas warns fiscal-year earnings may plunge (Financial Year - marketwatch)

    By MarketWatch

Financial Year

SYDNEY--Qantas Airways Ltd. surprised the market Tuesday by warning full-year earnings may sink up to 91% as deteriorating global economic conditions widen losses at its struggling international unit.

Budget Deficit

Qantas shares slid as much as 18% in Sydney to a record low after Australia's biggest carrier said it expected pre-tax underlying profit in the year to June 30 of between 50 million Australian dollars ($49 million) and A$100 million, compared with A$552 million a year earlier.

The magnitude of the share decline reflected how far investors were taken off guard by the severity of the profit warning.

"People were aware of the economic environment, but it's really starting to bite into earnings," said Angus Gluskie, managing director of White Funds Management. "It's also biting into cash flows. It's highly likely you're going to see them needing capital very shortly."

The weak forecast reflects downward pressure on demand created by Europe's debt crisis, soaring jet-fuel costs, declining bond yields, and competition in Australia's domestic travel market, Qantas said in a statement. The International Air Transport Association in March cut its forecast for airlines' net profit for 2012 to a combined US$3 billion, down from $3.5 billion in a previous estimate.

Qantas said it expected an earnings-before-interest-and-tax, or EBIT, loss at its international unit of more than A$450 million. The figure is more than double the A$216 million loss reported for last year.

"The deterioration in international and domestic has only started to come through in recent weeks," Chief Executive Officer Alan Joyce said later on a conference call.