Jun 5, 2012

The $450m downgrade that sent Qantas shares diving

Qantas shares went into a power dive to a record low of $1.20 in early trading this morning after it slashed its profit guidance as much as 90%.

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

Qantas shares went into a power dive to a record low of $1.20 in early trading this morning after it slashed its profit guidance as much as 90% to $50 million-$100 million in the current financial year on an underlying EBIT basis compared to a $552 million profit on the same basis in the previous year.

The group told the ASX it expected the Qantas international operation to lose $450 million in the full year that ends at the end of this month on an EBIT basis compared to a claimed loss of $216 million EBIT in previous year.

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4 thoughts on “The $450m downgrade that sent Qantas shares diving

  1. zut alors

    ‘…and why it took until the very last moment to drop such a devastating profit warning on the market.’

    Ben, we know his modus operandi is to use the element of surprise. It’s a tactic which inevitably leads to trouble but it appears he can’t help himself.

  2. T2

    Is Mr Joyce QANTAS’ own Sol Trujillo – the spiv brought in from overseas who does not know the culture of either his clients or his company, and who ends up driving his company’s shares through the floor. Mr Borghetti must be rubbing his hands with glee at Joyce’s handling of Virgin Australia’s major competitor.

  3. michael r james

    There is method in the madness; well some of it that can be distinguished from incompetence.

    Here is a comment from a similar story:

    [Many expenses incurred by Jetstar are paid for by Qantas.
    Qantas pays for all of Jetstar’s gates at Melbourne Int’l and some other airports. Qantas pays for many of Jetstar’s check-in desks at Sydney Int’l and other airports. Most rebooked seats on a Jetstar flight (in the event of cancellation, overbooking etc) are booked on a Qantas flight, with Qantas picking up the tab and Jetstar keeping the revenue. When a Jetstar plane needs to be briefly replaced due to breakdowns/unscheduled maintenance, it is a Qantas plane that replaces it, with Jetstar not required to pay for this. When Qantas transferred the profitable Singapore-Darwin-Cairns route to Jetstar, the deal involved Qantas paying $6 million to Jetstar for the privilege (yes, this is as stupid as it sounds). Qantas pays Jetstar over $6000 for every Jetstar A330 departure for freight, whether a single parcel is carried for Qantas or not (that’s over 80 departures a week). Qantas manages and pays for Jetstar’s treasury, government affairs and legal services.
    These are based primarily on insider reports, but have been reported in the media and tabled in parliament, and refused comment on by Qantas management. A basic expense audit of Qantas’s accounting books could settle a lot of the speculation of the dishonesty in reported expenditures and profits, and determine just how unprofitable Qantas’s international business is.
    Jay South Yarra June 05, 2012, 12:13PM]

  4. Mike Smith

    @T2: Yes, and yes. Deciding which airline to fly at the moment doesn’t even require thought.

    You have to wonder at the motives of trashing the Qantas name in favour of Jetstar.

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