The bloodbath in the Australian airline industry is continuing, with both Qantas and Virgin Australia reporting dire results.
Qantas today announced an underlying pre-tax loss of A$252 million and a statutory loss after Tax of A$235 million for the six months ended 31 December 2013.
Worryingly, its hitherto relatively robust Jetstar low-cost unit also seems to be suffering, mainly due to weakness at JetStar Asia as capacity surges into the south-east Asian market.
The Jetstar Group reported an underlying EBIT loss of A$16 million, down from an underlying EBIT profit of A$128 million in the first half last year
"Competitive pressure on yields (especially in South East Asia), a A$29 million share of associate losses, and fuel price and foreign exchange impacts were the main factors behind the result. Jetstar’s domestic operations in Australia remained profitable" said Qantas.
Qantas responded to all this with a A$2 billion cost reduction program and capital expenditure review.
"Qantas will take action to permanently reduce costs in all parts of the Qantas Group through to FY17, including fleet and network changes, productivity improvements, consolidation of business activities, new technology and procurement savings. More than 50 aircraft will be deferred or sold and the Group’s workforce will be reduced by 5,000 full-time equivalent positions by FY17," said the group.
The Qantas Group’s planned capital expenditure net of operating lease liability1 will be reduced to A$800 million in both FY15 and FY16, a total reduction of A$1 billion.
Virgin Australia also put in a dismal performance, with a first half net loss of A$83.7 million and a pre-tax loss of A$49.7 million.
Qantas and Virgin Australia are locked in a fierce battle for market share, which has put Qantas on the brink of either a government bailout or renationalisation.