Qantas heads towards first H2 loss in six years

SYDNEY (Reuters) - Qantas Airways Ltd forecast on Tuesday its first second-half loss in six years and unveiled capacity and job cuts as Australia's biggest airline battles a slump in passenger demand and rising competition.

Qantas, which like many other airlines is suffering from the global economic downturn, also said its full-year pre-tax profit may be down as much as 80 percent from a previous estimate. The surprise announcement knocked off 11 percent from its shares initially, before they recovered ground.

Many airlines, worldwide, have announced job cuts to reduce costs, with British Airways BA predicting last month it was heading toward a second year of operating losses and announcing further job cuts.

Singapore Airlines , the world's second-largest airline by market value, posted a 43 percent drop in quarterly profit in February and flagged further potential scale back of flights and capacity reductions to cope with the downturn.

"We have faced accelerated declines in passenger demand and revenue while market competition has intensified," Qantas Chief Executive Alan Joyce said in a statement.

The airline now expects profit before tax of between A$100-200 million ($73-146 million) for the year ending on June 30, down from around A$500 million it had forecast in November. It cited a "rapid and significant" deterioration of trading conditions in the past few weeks.

"People were expecting numbers lower than the guidance of A$500 million, but this is lower than anyone has forecast," said Michael Maughan, senior analyst at Australian fund manager Tyndall Investment Management.

In the first half ended December 31, Qantas reported a profit before tax of A$288 million. That would mean it is expecting a loss of as much as A$188 million in the second half. Qantas confirmed it was expecting a second-half pre-tax loss.

ROUGH WEATHER

World airlines are set to lose $4.7 billion this year as a result of the global downturn that has shrunk passenger and cargo demand, industry body The International Air Transport Association (IATA) estimated at the end of March.

On Monday, shares in Boeing Co sank more than 6 percent after the group said cuts in output of widebody planes and lower-than-expected airplane prices would reduce first-quarter earnings by about 38 cents a share.

Qantas said it would defer aircraft orders for four Airbus A380s and twelve Boeing 737-800s, and said it was also talking with Boeing about cutting the number of 787-800 planes to be delivered in the near term.

The airline said it would reduce capital expenditure by at least A$800 million in 2009/2010, lower flying capacity by a further 5 percent and remove an additional 500 management positions.

Last month, Qantas announced it would shed 90 top management positions, adding to 1,500 job cuts announced last year.

"In terms of overall business traffic, we are seeing a drop of somewhere between 15 and 20 percent, depending on the route," Qantas Chief Financial Officer, Colin Storrie, told a news conference.

Analysts welcomed the steps Qantas was taking but said it would be a long grind.

"Doing nothing is not an option in an environment like this...but it's still going to have to work quite hard to deliver it," Tyndall Investment Management's Maughan said.

Qantas shares fell to an early low of A$1.74, but erased most of the losses to be down 1.5 percent at A$1.93 in the afternoon, while the benchmark S&P/ASX 200 index <.AXJO> was up 2.4 percent. The shares have lost a quarter of their value so far this year, compared with the benchmark index's 1.3 percent gain.

($1=1.370 Australian Dollar)

(Editing by James Thornhill and Muralikumar Anantharaman)