Australian flag carrier Qantas has warned that its full-year profit could dive by up to 90% on the back of steep losses in its international arm.
The warning sent its share price plunging to all-time lows.
The airline said it expects underlying profit before tax - its preferred measure of financial performance - in the year to June 30 to be Aus$50-100m, compared with $552m the previous year.
In a statement to the stock market, the carrier blamed a deterioration in global operating conditions driven by the European economic crisis and its highest ever jet fuel bill.
A soaring Australian dollar and a bitter battle with unions over wages and conditions that saw chief executive Alan Joyce ground the entire fleet for 48 hours in October also cost the airline dearly.
Qantas's international business is expected to post a loss of over $450m, more than double the loss of $216m in the last financial year. In contrast, its far healthier domestic unit and low-cost offshoot Jetstar are expected to book a combined profit exceeding $600m.
"We remain focused on returning Qantas international to profitability in 2014 and for Qantas international and domestic combined to exceed their cost of capital on a sustainable basis within five years of August 2011," said Joyce.
In a bid to halt the dramatic slide in profits, Joyce last month announced Qantas would split its international arm from its domestic operations. Each of the two entities, currently combined as Qantas Airways, will run as separate businesses from July with their own chief executives and reporting of financial results.
The move came just days after Joyce said 500 jobs would be axed in Qantas's heavy maintenance and engineering operations.
"We have taken decisive action to mitigate losses in Qantas international by withdrawing from loss-making routes, reducing capital investment, and transforming Qantas engineering," Joyce said today.
"The introduction of a new Qantas Group structure with dedicated CEOs for Qantas international and Qantas domestic will bring further rigour to our business," he said.
Joyce said the restructuring programme is expected to incur costs of up to $380m in the 2011/12 financial year but would result in more than $300m in annual benefits once in place.
