Australia's biggest airline Qantas Airways will scrap first-class cabins on most routes after a slump in demand for its most expensive seats led to a 72 per cent drop in first-half profit.
The carrier slumped the most in a year in Sydney after saying net income was A$58 million (€38.1 million) in the six months ended December 31st, missing the A$82 million median estimate in a Bloomberg survey of five analysts. The airline will begin a A$400 million project to change seats and upgrade inflight entertainment systems next year, it said in a statement today.
First-class will disappear on flights to Hong Kong and Johannesburg as business customers shift to cheaper seats or budget unit Jetstar, where earnings almost tripled. Qantas forecast annual pretax earnings of A$400 million, trailing analyst estimates for about A$530 million, because of rising fuel costs.
"The market is disappointed in the full-year guidance," said Sean Fenton, who helps manage about A$765 million at Tribeca Investment Partners in Sydney. "International is still weak with yield pressures and increased capacity from competitors, so they are not getting the operating leverage the market was looking for."
Sydney-based Qantas fell 8.1 per cent to A$2.73 at the close of trading on the Australian stock exchange. It
was the biggest decline since February 5th, 2009.
Qantas' first-half pretax profit was A$90 million, compared with the company's December 21 forecast for earnings between A$50 million and A$150 million. The airline posted its first semi- annual loss in six years last year amid the biggest financial crisis since World War II.
The company will reconfigure 29 aircraft including Airbus A380s and Boeing 747-400 planes.
Qantas' existing fleet of six A380s, the world's largest commercial passenger plane, and the six due in the next two years will keep first-class cabins for destinations such as London and Los Angeles. The planes have a total of 490 seats.
The remaining eight A380s on order, which will each carry 550 passengers, and nine 747-400s will feature business, premium economy and economy only, Qantas said.
"It will be more business-class seats and less first-class seats because the first-class market has been in long-term decline," chief executive Alan Joyce said.
The global airline industry will take at least three years to recover from a travel slump caused by the worst recession in six decades, according to Giovanni Bisignani, chief executive of the International Air Transport Association. The airline industry globally lost $50 billion in the past 10 years, including $11 billion in 2009
alone. The industry may lose a further $5.6 billion this year, according to IATA.
Bloomberg