Qantas reports $256m loss and cancels plane orders

Australia's Qantas going through turbulent times

Australian airline Qantas has reported its first annual loss since it was privatised in 1995, amid high fuel costs and growing losses at its international operations.

The firm made a net loss of 244m Australian dollars ($256m; £161m) for the year to 30 June.

This compares with a net profit of A$250m in the previous year.

Qantas also cancelled orders for 35 Boeing Dreamliner jets worth $8.5bn due to "lower growth requirements".

Alan Joyce, chief executive of Qantas, said growth was expected to be slow due to the uncertain global economic environment.

"Clearly we confront very difficult and uncertain trading conditions in Britain, Europe and the United States," he said in a statement.

'Biggest challenge'

The biggest impact on Qantas' earnings came from the growing losses at its international operations, which reported a net loss of A$450m.

The airline's international business has been hurt by slowing demand from its key markets.

Start Quote

Qantas' international turnaround plan is on track and set for improvement in 2012-13”

End Quote Alan Joyce Chief Executive, Qantas

Qantas has also lost passengers to rival carriers, reducing its share of the international market.

"Our biggest challenge is Qantas International," Mr Joyce said.

The firm has already taken measures to try to turn around the fortunes of the unit, including cancelling services on loss-making routes and streamlining some of its maintenance operations.

The restructuring plan is also expected to result in 2,800 job cuts, helping to reduce costs further.

The firm said that, when fully implemented, the measures were likely to result in savings of as much as A$300m per year.

"Qantas' international turnaround plan is on track and set for improvement in 2012-13," Mr Joyce said.

Labour costs

The airline's fortunes were also hit by a variety of other factors in the past financial year.

Rising fuel costs made a big dent in its balance sheet. The firm said its fuel costs had soared to a record A$4.3bn during the period, an increase of A$645m from a year earlier.

Qantas planes Slowing growth at its international operations has resulted in Qantas cancelling plane orders

In addition, the dispute between management and staff, which led to Qantas grounding its entire fleet last year, also reduced earnings.

Qantas said the industrial action had cost the firm A$194m.

Analysts said that, despite the job cuts, high labour costs were still a concern for Qantas.

"Compared with other Asian carriers, its labour costs still remain quite an issue," Timothy Ross of Credit Suisse told the BBC's Asia Business Report.

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