AAP
Qantas Airways Ltd has reported its lowest first half net profit in at least a decade, will not pay an interim dividend and says its major overseas markets remain weak.
The result missed market expectations and investors reacted badly to news of the scrapped dividend, sending the airline's shares down by more than eight per cent, the most in about 10 months.
The national carrier posted a $58 million net profit for the six months to December 31, down 72 per cent from $210 million in the prior corresponding period.
While the result marked a return to profitability after a $93 million loss in the second half of 2008/09, it was the smallest first half net profit in at least 10 years.
It was also well below the $300 million average net profit generated over at least the past eight years.
First half pre-tax profit was $90 million, in the middle of the airline's forecast range of $50 million to $150 million.
Qantas chief executive Alan Joyce defended the soft result by contrasting the carrier's profitability against global aviation industry losses, but investors were unimpressed.
Shares in the airline were pummelled at the start of trade on Thursday and finished down 8.08 per cent, or 24 cents, at $2.73, the weakest close in nine weeks.
Fat Prophets analyst Colin Whitehead said the negative reaction was also due to the company's fairly weak outlook.
"Although Qantas has delivered an earnings recovery, it's basically flagging that it may not be sustainable or not at the rate that people would have otherwise expected," he said.
Qantas projected an underlying pre-tax profit in a range between $300 million and $400 million for 2009/10, and forecast fuel costs to rise by $200 million in the second half from the first half.
The annual estimate compared with the 2008/09 underlying profit before tax of $120 million.
Mr Joyce said there had been encouraging signs in the airline's domestic operations but major international markets such as the US and UK remained weak.
"There are signs of improvement for us in the Australian consumer confidence, which has led to a recovery in domestic yields above last year's levels and an improvement in freight yields," Mr Joyce told journalists on Thursday.
"However, the yield recovery in international is slower.
"That's as a consequence of weaker economic recovery in our major trading markets and also because of the international capacity being added by competition."
Qantas said it was prudent not to pay a dividend, given the uncertain economic outlook and significant capital expenditure planned for fleet renewal, and did not indicate when dividends may be reinstated.
The airline's first half results told two contrasting stories - wholly owned budget subsidiary Jetstar continued to go from strength to strength while Qantas mainline struggled.
The full-service Qantas suffered a 39 per cent fall in underlying earnings before interest and tax (EBIT) to $60 million in the half as yields and passenger revenues declined.
Jetstar's underlying EBIT jumped 181 per cent to a record $121 million, with passenger numbers up by 43 per cent in the half.
But Mr Joyce said having a diverse range of assets - a full-service and low-cost airline, as well as a frequent flyer program - gave the Qantas group strength.
He was cautiously optimistic about the period ahead.
"Certainly the first half of this financial year was lot better than the second half of the last financial year, so the trend is in the right direction," Mr Joyce said.
Qantas chief financial officer Colin Storrie said the company was always worried about higher oil prices, but he expected prices to move within current levels of between $US70 to $US80 a barrel.
