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Qantas downgrades profit forecast for 2002/3

Travel News Asia 7 May 2003

Qantas today said that because of the continued impact of the SARS virus across all sections of the aviation and tourism industries it has been required to further downgrade its profit forecast for the 2002/03 financial year.

The Chief Executive Officer of Qantas, Mr Geoff Dixon, said the impact of SARS over recent weeks had affected all areas of the airline.

"While our international and domestic airlines have been worst hit, there has also been a flow through to all our subsidiaries, including Qantas Flight Catering, Qantas Holidays and Australian Airlines," he said.

Mr Dixon said load factors continued to fall and yields were increasingly under pressure as airlines dropped fares to stimulate demand.

"All international routes have been affected to some degree, with key Qantas destinations of Hong Kong, Singapore and Japan suffering the most. Our bookings to Hong Kong are down 64 per cent and Japan bookings are down 30 per cent.

"We now only operate seven of the 30 services per week we planned to operate to Hong Kong before the war in Iraq and the outbreak of SARS. "More recently, there has been a downturn of passenger bookings from Continental Europe, particularly from France and Italy, by about 45 per cent and 33 per cent respectively. Forward bookings to the UK are down about 14 per cent.

"Fifteen per cent of the Qantas domestic business is made up of visitors arriving on international services. The downturn in the inbound market has severely affected this section of the market and will have an impact on overall domestic profitability," he said.

Mr Dixon said Qantas was reviewing, and would widen, the range of initiatives it had put in place following the commencement of the war in Iraq and the outbreak of SARS. These initiatives have included:

the use of accumulated leave to reduce staffing numbers by the equivalent of 2,500 full time employees by 30 June 2003 and by the equivalent of 1,000 employees between July and September 2003;

a restructuring program involving 1,000 redundancies, 400 permanent positions eliminated through attrition and 300 permanent positions converted from full time to part time;

a freeze on capital and discretionary expenditure.

Qantas stated that further initiatives will include:

increased use of accumulated leave to reduce staffing numbers;

increased redundancies;

expansion of the leave without pay program;

increased use of part time workers;

significant restructuring of work practices and activities; and

reduction of capital expenditure, including retirement of some aircraft and deferral of delivery of new aircraft.

"While all capital expenditure is being reviewed, new product and customer service initiatives that are proposed and underway for both international and domestic operations will continue," Mr Dixon said. "These are strategically important elements of our ongoing business plan."

Mr Dixon said the aviation industry was going through the most difficult period in its history. Following the consequences of the events of 9/11, the war in Afghanistan and the threat of terrorism, the lead-up to the war in Iraq caused a further significant downturn in demand for airline travel.

"The outbreak of SARS, which was entirely unexpected, has compounded the difficulties facing our industry, particularly in this region."

Mr Dixon said that despite the current difficult environment Qantas still remained a strong and viable carrier.

"The work undertaken over the past seven years has positioned the company well," he said. "We have a healthy balance sheet with more than $2.0 (S$2.23) billion in cash and access to substantial other sources of liquidity."

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