Credit Suisse cuts Qantas forecast

Analysts Credit Suisse First Boston have downgraded their profit forecasts for Qantas Airways Ltd, Australia's biggest airline, after revising its oil estimates.

CSFB cut its net profit forecast by 8 per cent for fiscal 2006, by 12.2 per cent for fiscal 2007 and by 9 per cent for 2008.

"In our view, Qantas remains a trading stock," CSFB analysts Anthony Moulder, Greg Ward and Gordon Korkie said in a report, keeping a "neutral" rating and a share price target of A$3.42 ($3.81).

Shares in Qantas last traded at A$3.36 on Monday.

"Despite our increased oil price assumptions, we could expect further earnings pressure from oil remaining at current levels, as highlighted by the forward oil curve, which remains in contango," the CSFB analysts said.

CSFB said it understood Qantas' level of hedging against the oil price was at an average of US$49.50 ($72.43) per barrel, with 82 per cent hedged in the first half and about 38 per cent hedged in the second half, giving an average 2006 hedging level at 60 per cent.

Qantas, which has introduced fuel surcharges on passengers to help offset the cost of soaring fuel prices, had also hedged 25 per cent of the refinery margin, said CSFB in the report.

- REUTERS