What: Australia's iconic airline Qantas Airways Limited (ASX: QAN) today lifted the lid on a record loss of $2.8 billion for the year on the back of $2.6 billion in fleet write-downs and an underlying loss of $646 million.
The underlying loss was blamed on the cumulative impact of two years of competition, rising costs and several other factors other than poor management. Chief executive Alan Joyce complaining that the price of fuel had risen and other airlines like Virgin Australia Holdings Ltd (ASX: VAH) were flying the same routes while offering cheaper airfares to passengers.
What now: Qantas' shares have dived in value around 50% over the last five years of Alan Joyce's tenure as chief executive on an extremely generous remuneration scheme. Despite being chief executive way back in 2008, Joyce is now focusing on 2015 as the turnaround year and remains most famous for his decision to ground the entire fleet in 2011 in response to an internal industrial dispute.
Qantas' domestic passengers don't fly with it as much as they used to and the international fleet has been hit by low-cost competition from state-backed airlines on some of Qantas' key earnings-driving trans-continental routes.
AIR N.Z. FPO NZ (ASX: AIZ) the entity known as Air New Zealand, yesterday posted a spectacular profit. It has operated under a mixed ownership model with the New Zealand government after the airline required time and a big cash injection to turn around its own own ailing operations amidst the post 9/11 airline industry crisis.
The deal worked out well for both parties with the entrepreneurial Kiwi pollies turning a profit and the airline executing an operational transformation resulting in yesterday's NZ$262 million profit.
What of the outlook: Qantas' shareholders are likely to be fuming at today's results and are unlikely to receive any sympathy from the current Australian government.
The group expects to return to an underlying profit in the first half of FY15, although that is as the group puts it subject to factors outside its control. Those factors of course include competition, fuel costs and the efficient realisation of cost benefits.
Shares were up 5% to $1.36 in early trade presumably on the promise of better times ahead, however Qantas remains a prime example of why it's hard to consistently make money in the airline business due to overcapacity.
In my opinion Qantas has also lost its way under present management and shows why having a quality management team running a business is so important.
