Qantas flags lower interim earnings

Australian carrier Qantas flagged on Monday a hit to first half earnings with falling international airfares offsetting a decline in fuel prices.

The airline, which has turned itself around in recent years on the back of aggressive cost-cutting, said it expects underlying profit before tax to be between Aus$800-850 million (US$607-645 million) for the six months ending December 31.

This compares to Aus$921 million in the same period a year ago.

Qantas shares initially slumped more than nine percent, but rebounded in early afternoon trade to be 3.7 percent higher at Aus$3.05.

Chief executive Alan Joyce said the interim forecast was based on revenue falling 3.2 percent in the three months to September 30 due to increased competition on international routes.

"Like most carriers globally, we are seeing international airfares below where they were 12 months ago," he said in a trading update.

"But the impact of that is tempered by the competitive advantages we’ve been working hard to fortify including our strong domestic position and diversified loyalty business.

"We remain disciplined on cost, continue to manage capacity carefully to match demand, and have secured the benefit of lower fuel prices through our hedging."

In the year to June 30, Qantas posted a record net annual profit of Aus$1.42 billion and announced its first payout to shareholders in seven years.

It followed a push to cut some Aus$2 billion in costs and restructure the airline over three years beginning in early 2014, with thousands of jobs axed and dozens of aircraft sold or orders deferred.