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Jetstar loses ground in NZ as Qantas plunges to A$2.84B loss

Jetstar loses ground in NZ as Qantas plunges to A$2.84 bln loss

By Paul McBeth

Aug. 28 (BusinessDesk) - Jetstar, the discount unit of Australian airline Qantas Airways, lost ground in New Zealand, while claiming better yields on key routes, as its parent plunged into the red after slashing the value of its international fleet.

The discount airline had 20.7 percent of New Zealand's domestic market at June 30, down from 22.4 percent a year earlier, Qantas said today when releasing its annual result. Passenger numbers dropped 7.7 percent to 1.72 million and revenue passenger kilometres fell 6.2 percent to 1.13 million. Capacity shrank 4.5 percent to 1.42 million available seat kilometres.

The airline's unit said it had a strong and improving second-half performance across key metrics leading into the 2015 financial year, and had "strong yield improvement on key routes," according to presentation slides accompanying the release.

Qantas didn't break out any financial figures for domestic the New Zealand service, which are part of the wider Jetstar segment. The Australian discount airline reported a loss before interest and tax of A$116 million in the 12 months ended June 30, on a 2 percent fall in revenue to A$3.22 billion.

The Australian group made a loss of A$2.84 billion as it wrote down the value of its international fleet by A$2.56 billion, faced fleet restructuring costs of A$394 million and redundancy and restructuring costs of A$428 million. The underlying pretax loss was A$646 million compared to a profit of A$186 million in 2013.

The Australian airline's fortunes contrast with those of trans-Tasman rival Air New Zealand, which yesterday reported its third year of profit growth and doubled its annual return to shareholders with an unexpected special dividend.

Qantas chief executive Alan Joyce said the airline has gone through the worst as it overhauls its business and anticipates "rapid improvement in the group's financial performance in financial year 2015."

The airline sees "substantial value" in the Jetstar airlines that will be realised over time, particularly from Asian markets, though it won't embark on any new ventures until its transformation programme is completed, he said.

Qantas split its international and domestic businesses into separate segments, which Joyce said creates potential for future investment in the international business.

"It will create the long-term option for Qantas International to participate in partnership opportunities in the international aviation market, with a view to achieving further efficiencies and improved returns to shareholders," he said.

Shares of Qantas fell 1.8 percent to A$1.295 on the ASX yesterday, and have gained 18 percent this year.


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