AUSTRALIA’S QANTAS Airways flagged a fall in first half profits of at least 50 per cent as a series of strikes, the grounding of the fleet and high fuel bills take their toll.

But the airline, which suspended all flights for two days last month in a drastic attempt to force a resolution with unions, soothed investors by indicating the move had paid off with international forward bookings back to normal.

Qantas said the second half outlook remained volatile given global economic uncertainty, fuel prices and foreign exchange rates.

It also denied a media report that a plan to set up an Asian premium airline, seen as key to turning around the loss-making international operations, was set to be dropped.

“For us investors, this year expectations are low. Our focus is entirely on how the recovery is shaping up plans for the Asian hub. So far that looks positive,” said David Liu, head of research at ATI Asset Management, which owns Qantas shares.

Qantas shares, which briefly fell after the announcement, recovered to trade more than 5 per cent higher by late morning. That was the sharpest intra-day rise in nearly two months. The benchmark index was up 1.6 per cent.

The airline said it expected an underlying profit before tax of between 140 million Australian dollars and A$190 million in the six months to December.

That compares with A$417 million a year ago and a A$250 million average in a straw poll of three analysts by Reuters.

“Since the termination of industrial action by (industrial umpire) Fair Work Australia we have seen customers return to Qantas,” the airline’s Irish chief executive Alan Joyce said in a statement.

With both Qantas and the three unions involved submitting to the industrial umpire for a forced settlement, the threat of service disruption has vanished. That has meant the focus is on plans to turn around the ailing international operations.

Qantas international operations are losing about A$200 million a year, and the airline has said it plans to set up a premium airline and a low-cost airline jointly with Japan Airlines and Mitsubishi in Asia, leading to a backlash from unions who fear jobs being shifted to lower cost centres overseas. – (Reuters)