Qantas Cut Flights to China, Earnings to Be Hit by Coronavirus

February 19, 2020Business News
Qantas Cut Flights to China, Earnings to Be Hit by Coronavirus
Passengers get off the plane after Qantas' longest non-stop commercial flight from New York to Sydney. (Screenshot/Nine News)

Qantas has posted an interim net profit slide to A$445 million ($297.78 million), blaming the 3.9 percent drop on protests in Hong Kong, higher foreign exchange costs and slower global freight demand.

The coronavirus outbreak in the second half has added to Qantas’ woes and is expected to cut A$100 million to A$150 million ($66.92 Million to $100.38 million) off its bottom line.

The carrier has responded to the drop in demand by slashing flights to Asia by 15 percent until the end of May and bringing forward a Beijing exit.

With less demand from corporate and leisure, it is also will be reducing capacity by 2.3 percent.

The group says its first-half net profit of A$445 million ($297.78 million), compared with A$463 million ($309.83 million) at the same time last year, came after an A$119 million (79.63 million) impact.

That was from protests in Hong Kong, subdued demand in global freight markets and other increases in costs associated with foreign exchange rates on non-fuel costs.

Qantas also faced an extra A$55 million ($36.8 million) in operating costs after selling domestic airport terminals.

After all that, though, the underlying profit was A$771 million ($515.93 million), or just 0.5 percent down on A$775 million ($518.61) in the prior corresponding period.

However, chief executive Alan Joyce says Qantas fundamentals remain strong, with interim revenue 2.8 percent higher this financial at A$9.5 billion ($6.36 billion).

“In the domestic market, we dealt with some travel demand weakness and a structural change in our overheads from the sale of domestic terminals. Fundamentally, Qantas and Jetstar both did well,” Joyce said.

“Internationally, the growth in passenger revenue outweighed the impact of disruption in Hong Kong and a freight market affected by trade wars.”

He said the ultra-long-haul routes such as Perth to London continue to perform extremely well and the loyalty program achieved another record result.

The carrier announced an off-market share buyback of up to A$150 million ($100.38 million).

It will pay shareholders a fully franked interim dividend of 13.5 cents to the tune of A$201 million ($134.5 million).

Qantas Hit By Hong Kong Protests

* Net profit down 3.9 percent to A$445m ($297.78 million)

* Revenue up 2.8 percent to A$9.5b ($6.36 billion)

* Interim dividend 13.5 cents, fully franked, up 12.5 percent.

By Liza Kappelle

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