By Matt O'Sullivan
QANTAS has warned that profits will fall by almost a quarter this financial year to about $750 million because of high jet fuel prices and an economic slowdown discouraging travellers from flying.
Yesterday the airline announced a 44 per cent rise in after-tax profits to a record $969 million for the year to June - slightly less than the market had expected - as it boosted passenger numbers and offset rising oil prices by hedging its fuel bill.
Qantas also revealed that its board had delayed until next month a decision on a partial float this year of its $2 billion Frequent Flyer program.
With equity markets unlikely to turn for the better any time soon, this suggests an initial public offering will not happen until next year.
"It was a good result and obviously they benefited from some good fuel hedging they put in place, and that protected them from when the oil price went up," an ABN Amro analyst, Mark Williams, said.
"It was just towards that latter half of the year that oil spiked and demand started to soften."
Qantas contained its fuel bill to a rise of just 8 per cent in 2007-08 thanks to its hedging policy, but this financial year it faces a $1.6 billion surge in the costs to $5.2 billion if oil prices remain at present levels.
The airline's pre-tax profit rose 46 per cent to $1.408 billion in 2007-08 - beating its guidance in April - helped by an 8 per cent lift in revenue.
The result included $291 million in compensation from manufacturers for delays in the delivery of new aircraft.
Qantas has suffered damage to its reputation in recent months after severe disruptions to flights caused by a 10-week industrial dispute with its engineers and continuing maintenance problems - most notably the emergency landing of a Boeing 747 in Manila last month.
Its departing chief executive, Geoff Dixon, yesterday stressed that the airline continued to be one of the safest in the world despite perceptions that it might have "taken its eye off the ball".
Mr Dixon, who steps down in November, admitted the recent industrial dispute was still affecting operations and said it would take another three to four weeks to resolve scheduling problems.
Having benefited from "one of the sweetest spots in aviation" this time last year, Qantas faced the triple whammy of high fuel prices, increased competition and an economic slowdown in the fourth quarter.
"What we are seeing is a bit of a slowdown domestically, a slowdown in some of the international routes, particularly leisure. It's difficult … but I do underline that our position is stronger than most," he said.
Notably absent at the Qantas briefing was Peter Gregg, its chief financial officer who resigned this week. There was uncertainty about whether the third in charge, John Borghetti, would remain, but management said yesterday he had "indicated" he would stay.
Qantas will pay a final dividend of 17c a share on October 1, taking the payout for the year to 35c - 5c more than in 2006-07. Its shares rose 8c to $3.48 yesterday.