Australia’s Qantas Airways yesterday said it was axing first class from all but a handful of routes in a post-financial crisis overhaul, as half-year profit slumped 72 percent to US$52 million.
Chief executive Alan Joyce said passengers would only be able to fly first class between Australia and London, via Singapore, and between Australia and Los Angeles after demand dropped dramatically in the wake of the downturn.
“Our first class product will remain on key routes,” he told reporters. “It’s a re-balance — there are more business class seats and less first class seats.”
The flag-carrier will reconfigure 29 aircraft and upgrade some planes’ in-flight entertainment at a cost of A$400 million (US$360 million), leaving first class on just 12 Airbus A380s.
“The reconfiguration is driven by the longer-term trend of what we believe is happening in demand,” Joyce said.
“The long-term trend in first class has been for a decline. Our seat factor [load] in first class has been below 40 percent, so we have plenty of room to cope with all expected future demand,” he added.
The first-half announcement, and failure to pay an interim dividend, sent shares into a tailspin with Qantas closing down 8.08 percent at A$2.73.
However, Joyce was upbeat despite the steep on-year slump, pointing out that other airlines were booking losses as the world makes a tentative recovery from the downturn.
He added that all sectors of Qantas’ operations, including budget offshoot Jetstar, were in the black, while underlying profit for the full financial year to June was expected to be between A$300 million and A$400 million.
“According to IATA [International Air Transport Association], the world’s airlines will record net losses of US$5.6 billion in 2010,” Joyce said. “While the operating environment has been unprecedented and challenging, this result reflects the strength and diversity of our operations.”
Joyce stressed the company’s strong cash position of A$3.5 billion and said Jetstar, one of Asia’s top low-cost airlines, had enjoyed a record six months.
Qantas partly blamed weaker demand for the fall in profit, which came despite sharply lower fuel costs and an efficiency drive that pared operating expenses by 11 percent.
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