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Qantas looks past record loss

Thursday, August 28 09:03:06

Qantas Airways Ltd is looking past its record annual loss and predicting blue skies ahead, as a landmark change in Australian laws opens the door to foreign investment in the airline's international arm - its biggest headache.

A funding injection into its international division would allow Qantas to better compete on price and service offerings with rivals whom it says are bolstered by unlimited funding from wealthy state backers.

It would also support Qantas' plans to re-configure its aging fleet, invest resources in popular routes and further enlarge its global network, partly through its partnership with Emirates Airline.

Qantas said on Thursday that it expected to return to profit sometime in the current financial year. The surprisingly positive outlook gave the airline's shares their largest one-day percentage gain in a year.

Qantas International has been the biggest drag on the airline's earnings, with its loss for the year ended June 30 the largest among the carrier's divisions and doubling from a year earlier.

Aviation experts also point the finger at Chief Executive Alan Joyce and his management team, criticising ill-fated moves such as the rollout of its low-cost Jetstar subsidiary in an already crowded Asian market.

Joyce acknowledged that a record A$2.8 billion ($2.6 billion) annual net loss and an underlying loss before tax of A$646 million were "unacceptable", but vowed that "the worst is over."

The headline loss was almost entirely due to a A$2.6 billion non-cash writedown in the value of Qantas' fleet as it restructured to take advantage of new domestic laws allowing greater foreign investment.

In the biggest restructure since Qantas was privatised two decades ago, the airline is hiving off its international arm from its domestic unit. The move will allow a foreign airline to take as much as a 49 percent stake - a major change from the previous 35 percent limit.

Qantas shares were up 7.3 percent in midafternoon trade at A$1.39, a three-month high and the biggest intraday gain in a year. The stock reached an all-time high of A$6.05 in 2007 before the global financial crisis hit. (Reuters)

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