Qantas profits down 66%

The $216 million after-tax result was the worst since the airline's maiden loss in 2003 when SARS and the Iraq war crippled ticket sales and tore into earnings.

However, unlike many of its rivals, Qantas expects to stay in profit in the full year. It forecasts earnings of about $500 million when it reports in August.

A string of belt tightening initiatives, including the sale of Qantas Holidays for $77 million, widespread retrenchments, and the retirement of 22 aged aircraft, kept the airline's accounts in the black during the six months to December 31.

However, unlike many of its rivals, Qantas expects to stay in profit in the full year. It forecasts earnings of about $500 million when it reports in August.

A string of belt tightening initiatives, including the sale of Qantas Holidays for $77 million, widespread retrenchments, and the retirement of 22 aged aircraft, kept the airline's accounts in the black during the six months to December 31.

Chairman Leigh Clifford blamed the grim result - and the need to cut the interim dividend by two thirds to 6 - on the state of global financial markets, currency losses and the record price mid-year for fuel.

While the price of jet kerosene had eased, weaker demand was mitigating any savings.

Alan Joyce, the airline's chief executive, told analysts that last year's protracted dispute with its engineers had cost the business $150 million.

He said Qantas was not immune from the challenges posed by global conditions.

"Numerous airlines have failed over the past year, while many are unable to produce profits and are at risk of becoming unsustainable.

"Last week British Airways reported the first profit downgrade in its history and most of the airlines in the One World Alliance are losing money in the current financial year," Mr Joyce said.

He said Qantas had the assets to cope with the volatility in the market.

Speaking from Madrid where he is attending a One World conference, Mr Joyce noted that Qantas and "probably only one other alliance partner" were still profitable.

Colin Storrie, the company's chief financial officer who took part in the briefing from Sydney, indicated that further jobs cuts were unlikely as long as market conditions did not materially worsen. Net profit of $216 million compares with $617.6 million in the corresponding period last year.

The pre-tax result was $288 million, down 68 per cent on $905 million in 2008.

Cash reserves totalled $2.83 billion at the end of December and would grow to more than $3 billion as a result of a $500 million capital raising announced yesterday.

Existing Australian and New Zealand shareholders will be allowed to subscribe for up to $10,000 worth of scrip that will rank equally with their existing shares but which will not attract dividends.

Funds from the raising will go toward renewing the airline's fleet and reducing net debt, which stood at $6.47 billion at the end of December.

A breakdown of earnings showed the Qantas brand slumped 76 per cent in the half to $199 million as passenger numbers fell.

Jetstar profit dropped 48 per cent to $72 million on fuel costs although passenger numbers rose almost 14 per cent with revenue growing more than 15 per cent to $716 million.

The frequent flyer unit posted a 4.4 per cent rise in earnings to $119 million.

Qantas postponed an initial share sale of the division last year.

Qantas shares have been in a trading halt since Monday because of the capital raising.