(Adds detail, company comment)
By Jane Wardell
SYDNEY Aug 28 Qantas Airways Ltd
reported its biggest ever financial loss on Thursday after
writing a hefty A$2.6 billion ($2.4 billion) off the value of
its fleet due to a company restructure.
Australia's national flag carrier attempted to reassure
investors after a turbulent few years, saying the worst was now
behind it and that it expected a return to underlying profit
growth in the first half of the current financial year.
The so-called 'Flying Kangaroo' has been bruised by high
fuel costs, a strong Australian dollar, increasing international
competition and a domestic price war with arch-rival Virgin
Australia Holdings. It also says it is handicapped by
government laws restricting its access to foreign funding.
"There is no doubt today's numbers are confronting, but they
represent the year that is past," Chief Executive Alan Joyce
said in a statement. "We have now come through the worst."
Despite an investor push for major asset sales, Qantas said
it had no plans to spin-off its profitable Frequent Flyer
loyalty scheme, which analysts value at up to A$2.5 billion.
The sizeable writedown gave the carrier an unprecedented
A$2.8 billion net loss for the year ended June 30, compared with
a restated net profit of A$2 million a year earlier.
That overshadowed a better-than-expected underlying loss
before tax of A$646 million, compared with a restated A$186
million profit a year earlier. Analysts had on average
anticipated an underlying loss around A$750-770 million.
Chief Executive Joyce said there was a "clear and
significant" easing of both international and domestic capacity
growth, which would stabilise the revenue environment.
Qantas and Virgin Australia have waged war over the past
year to boost or retain market share.
Analysts expect Virgin to post a A$250-270 million pre-tax
loss when it reports earnings on Friday, with both airlines
caught out by excess capacity in international markets and moves
by international carriers to increase capacity into Australia.
In stark contrast, Air New Zealand Ltd, which owns
around 26 percent of Virgin Australia, on Wednesday reported a
44 percent jump in annual net profit to NZ$262 million. The New
Zealand flag carrier also said it planned to significantly grow
capacity this year.
Qantas said a review of its Frequent Flyer loyalty program
had concluded there was "insufficient justification" for a
partial sale, with the division continuing to offer major growth
opportunities for the company.
However, it said it had identified other potential asset
sales, including airport terminals, property and land holdings.
Any proceeds from such sales would be used to repay debt.
The fleet writedown was a result of the company's move to
establish a new holding structure that splits the group into
four units: Qantas International, Qantas Domestic, Qantas
Loyalty and Qantas Freight.
The $2.6 billion writedown was due to a restatement of the
cost of aircraft purchased in the international division.
(1 US dollar = 1.0714 Australian dollar)
(Reporting By Jane Wardell; Editing by Diane Craft and Mark