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Qantas posts A$200m loss on international services

Qantas described the global business environment as “challenging and extremely volatile” as its international business reported a full-year loss of A$200 million.

The Australian carrier said the result from international services in the year to June was an “unacceptable return” adding that “continuing down this path would be unsustainable”.

Qantas Group has already moved to combat the international losses with changes to its joint service agreement with British Airways on services to London, plans to launch new airlines in Asia and Japan and 1,000 job cuts.

The Qantas Group made underlying profit before tax of A$552 million for the financial year ending June 30, a rise of 46% on the previous 12 months.

Natural disasters and “major weather events” cost the airline A$224 million, including severe flooding and cyclones in Queensland, the Christchurch earthquake, the earthquake and tsunami in Japan and the Chilean volcanic ash cloud.

Chief executive Alan Joyce said the result was achieved despite a number of challenges facing Qantas and the global aviation industry. “This result reflects the strength of the Qantas Group’s portfolio and is our best performance since the global financial crisis,” he said.

“We achieved the result while overcoming significant external and operational factors, including a series of natural disasters, a 28% increase in average fuel prices and an underperforming international business.

“But it is important to put the result in context,” Joyce added. “The group’s planned capital expenditure over the next two years exceeds A$5 billion. Fuel prices are expected to remain high and there is considerable uncertainty in the global economy.

“Qantas International reported a loss of over A$200 million in FY11 on invested capital of over A$5 billion, an unacceptable return. Continuing down this path would be unsustainable.

“Last week we announced a five-year plan to turn the international business around. We will reduce investment in underperforming business areas and direct capital towards growth opportunities.”

Joyce said: “Natural disasters and weather disruptions are an unavoidable reality for the aviation industry. However, the frequency and severity of disruptions seen in FY11 was unprecedented.”

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