Qantas reviews fleet orders

[lloyd fox]

QANTAS has warned it may review aircraft orders unless it can get a decent return on capital from its loss-making mainline international operations.

Chief executive Alan Joyce said yesterday the airline would not keep spending on the international business until it began returning its cost of capital. "We have to review the capital we are putting into it because the business is not performing, it's clear, and there are other parts of the business that are," Mr Joyce said on the sidelines of the International Air Transport Association annual meeting in Singapore.

"They are giving us a better return on the cost of capital -- that's where we should be putting the expenditure, and international is not going to see any more growth until it's turned around."

Asked if that meant adjusting aircraft orders, Mr Joyce said: "Everything is on the table." He added that the airline would still take its order of 20 Airbus 380s as planned and it expected that reconfigurations to increase seat density would help improve its international business.

Mr Joyce also said the airline would be working with alliance partners American Airlines, LAN Chile and British Airways to improve route structures and boost its productivity as part of negotiations with unions.

"That's where our biggest disadvantage comes in a lot of cases; we have poor productivity compared to a lot of airlines," he said.

The comments came as the airline announced that it was sponsoring Malaysia Airlines to become a Oneworld Alliance member and intended to forge closer links with the Kuala Lumpur-based carrier as part of its international strategy.

Mr Joyce said the airline would continue its separate low-cost operation in Singapore but was keen to talk to Malaysia about co-operation in Malaysian and other Southeast Asian markets.

The Qantas chief expressed concern that an International Air Transport Association outlook forecast that more than halved the global industry profit outlook for this year was too bullish because it had not sufficiently accounted for high fuel prices.

He said Qantas agreed that oil prices would remain at $US110 and this would affect demand.

Mr Joyce said the airline had increased fares a number of times but was still not covering fuel costs, and he believed other airlines were in the same boat.

"IATA has shown the impact on demand is related to the impact on economic activity, and if the economic activity suffers you will have a big negative impact on airline profitability," he said.

Mr Joyce blamed the threat of industrial action as a possible cause of yesterday's fall in Qantas's share price below $2.


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