Qantas Freight EBIT falls 30%

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Qantas Freight reported a fall in earnings before interest and taxes (EBIT) to 24 million Australian dollars ($22.3 million), because of challenging market conditions and the sale of Star Track Express. 

The earnings were down on 2013 when EBIT was 36 million Australian dollars. It is hoping the integration of Australian Air Express with Qantas Freight will benefit the Qantas Group for the 2014 financial year. Qantas Group made a statutory loss after tax of 2.8 billion Australian dollars, which it says reflects underlying loss and costs associated with the Qantas Transformation programme, and its structural review. The programme is restructuring Qantas and its businesses to make the airline group viable for the long-term.

Qantas Group chief executive officer, Alan Joyce, says: “We are undergoing the biggest and fastest transition since the privatisation of Qantas in 1995. We are well ahead in terms of the execution of our major plans. We have now come through the worst.”

Qantas had an underlying loss before tax of 646 million Australian dollars. It says this is because of capacity growing ahead of demand and fuel costs rising by 253 million Australian dollars to 4.5 billion. The Qantas Transformation programme is going to separate Qantas International and Qantas Domestic. The group is splitting itself into four cash generating units (CGUs). They are Qantas International, Qantas Domestic, Qantas Loyalty and Qantas Freight. Domestic, Loyalty and Freight have strong surpluses, but International requires a writedown of 2.6 billion Australian dollars. Fuel prices and foreign exchange movements hit Qantas International hard, costing it 142 million Australian dollars. 

International could have foreign investment, according to the group, because the Australian government has softened foreign ownership restrictions for the airline. The group has created a new holding structure and corporate entity for International to make investment possible. As part of the transformation programme, Qantas is updating its fleet by retiring older aircraft and fleet utilisation in the international and domestic markets. However, in its financial resjlts statement the group made no reference to the fate of its freighter fleet of xxx.  For its wider group fleet, all its older domestic Boeing 737-400 were retired by February 2014 and will retire seven Boeing 767-300 by the end of 2014. It will not renew the leases on two Airbus A330-200, while five Airbus A320ceo on order forJetstar Airways have been sold.

Its order for 21 A320ceo has been deferred for four years and converted to orders for 21 Airbus A320neo. The Group’s 50 Boeing 787 options have been pushed to 2017 and International’s final eight Airbus A380 deferred. International will use an Airbus A380 on its Dallas/Fort Worth route from September 2014, replace Boeing 747s for A330s on Asian routes and retire four Boeing 747-400s by early 2016.

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