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Qantas Profit Nosedives

Qantas: Profit tanked because of LA and London routes

Aug 23, 2009

MELBOURNE – Australian flag-carrier Qantas on Sunday blamed flagging demand on its key London and Los Angeles routes for an 88 percent drop in annual net profit.

Chief executive Alan Joyce said the two routes, once the airline's main profit generators, were operating at a loss due to increased competition and the impact of the global financial crisis.

Joyce said that while the airline's domestic operations were still profitable, the LA and London routes had dragged its international business into the red.

"Basically, those routes are the biggest issue," he told public broadcaster ABC.

"Those two big routes are very dependent on premium traffic. Premium traffic dropped by between 20 and 30 percent for us."

Qantas last week announced net profit fell to 117 million dollars (96.6 million US) in the 12 months to June, down from 969 million.

Competition in the Australia-Los Angeles route has ramped up this year with US giant Delta and Virgin's V-Australia taking on existing players Qantas and United Airlines.

The heavy discounting that has resulted means fares on the route touching all-time lows, less than half the cost from a year ago.

Joyce predicted the trans-Pacific route and the so-called "kangaroo route" from Australia to London would return to profit once the financial crisis eased and high-yielding business-class traffic returned.

"As the economy turns, as the business market comes back, those routes will improve," he said.

Joyce ruled out handing the routes to the airline's discount offshoot Jetstar in a bid to make them profitable, saying they were core elements of the Qantas brand.

Qantas: Profit tanked because of LA and London routes
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Source: AFP

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