Qantas Sees Earnings Growth

SYDNEY ~ Australian takeover target Qantas Airways said on Thursday it expected year to June net profit growth to be at the upper end of its anticipated 30-40 percent rise, as previously stated.

The Australian flag carrier, the subject of an AUS$11.1 billion (US$8.7 billion) recommended buyout offer, was responding to shareholder requests for more details about the company’s earnings outlook in light of the bid.

A Macquarie Bank-led Airline Partners Australia (APA) consortium has offered $5.45 per share for the company.

Key shareholders, UBS Global Funds Management and Balanced Equity Management, who between them hold just under a 10-percent stake in Qantas, have indicated the offer is too low as the airline is entering a “sweet spot” in earnings.

Both groups have also reportedly rebuffed offers from hedge funds to buy their stakes, raising the possibility that the APA consortium will not gain sufficient shares to meet its 90-percent minimum acceptance condition.

While the two groups do not quite have sufficient shares to block the offer, other shareholders could join with them in opposing the bid, including Qantas staff who fear job losses if the APA consortium wins control.

In the year to June 2006, Qantas’ net profit plunged 30.4 percent to $479.5 million dollars. Higher fuel prices jacked up costs by almost $1.1 billion.

On February 8, the company reported a nearly flat result for the first half to December, with net profit at $358.7 million against $352.8 million in the previous first half, which had been boosted by a favorable tax charge.

Qantas said it was aware there was a broad range of analysts’ pretax estimates for the year to June 2008, ranging from about $975 million to about $1.5 billion, with an average of about $1.23 billion.

It confirmed that its own expectations for 2008 were in line with the average analyst consensus forecast.

Qantas said its outlook for 2008 will be negatively impacted by the entry of Singapore-based Tiger Airways into the Australian domestic market, together with competitor Virgin Blue Holdings Ltd adding capacity.

Earnings in 2008 will also be impacted by Qantas itself adding capacity in response to increasing competition, he said.

“Until we know more about pricing, capacity and schedules, we are not in a position to quantify this impact,” Qantas said in a statement.

Qantas said its forecasts are subject to fuel costs not increasing significantly, demand continuing to grow and the achievement of cost saving targets.

In early trade, Qantas shares were up 0.06 cents at $5.10 in a firmer overall market.

APA has so far gained acceptances for 16.89 percent of Qantas.

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