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Takeover target Qantas Airways says it will have to keep cutting costs as competition increases from airlines flying to Australia such as Qatar Airways.
Qantas said yesterday the granting of rights to Qatar for it to as much as double its daily services to Australia reinforced the need for the Australian company to continue its restructure and lower costs.
"About 20 airlines fly these routes over a range of hubs and, with yet more capacity coming into the market, Qantas will have no option but to achieve further cost savings if it is to remain competitive," Qantas chief executive Geoff Dixon said.
Dixon said Qantas would be competing with three Middle Eastern airlines, Qatar, Emirates, and Etihad, all of which are government-owned, for passengers flying between Australia, the UK and Europe.
He said unions calling for more safeguards in the face of a prospective private equity buyout of Qantas had to realise that the carrier had to change.
"Whatever its ownership structure, Qantas must change, and will continue to change, to ensure it remains successful," he said.
Qantas gave in to investor pressure earlier this week, indicating its profit expectations for fiscal 2008 and revising its previous guidance for 2007.
This came as doubts emerged over a proposed A$11.1 billion ($12.6 billion) takeover by the Airline Partners Australia (APA) consortium.
The airline said it expected to deliver a 2007 result at the upper end of its forecast, which was for earnings between 30 per cent and 40 per cent higher than last year's result.
For the 2005/06 year, Qantas' annual profit fell 30 per cent to A$479.5 million as a result of a soaring fuel bill. Pretax profit fell 26.6 per cent to A$671 million.
The company said the outlook for 2008 was for a profit before tax in line with the consensus forecast among analysts of about A$1.23 billion.
APA, the private equity group trying to buy the nation's biggest airline, has urged shareholders to accept the A$5.60-a-share takeover offer after the federal Government smoothed the way for the buyout last week.
APA comprises Macquarie Bank, Allco Finance, Allco Equity Partners, US private equity giant Texas Pacific and Canada's Onex Group.
* Deputy Prime Minister and Transport Minister Mark Vaile yesterday announced the successful negotiation of the new arrangements allowing Qatar's national carrier, Qatar Airway, to operate services to and from Melbourne.
Australian carriers will gain access to Europe through Qatar's capital Doha under the agreement which Vaile said was an important milestone in the development of Australia's aviation relations with the Middle East.
Vaile said Qatar's Government had recognised the significance Australia placed on the issue of fair and equitable access for Australian carriers to developing aviation hubs.
"Without the ability to operate services through intermediate hubs such as Doha to long-haul destinations in Europe, Australian carriers cannot compete effectively on the world stage," he said.
Under the revised air services agreement finalised in Doha on March 15, Qatar Airways can launch the daily service to Melbourne and introduce a second daily service to another Australian city from 2008.
Vaile also called on the Victorian Government to immediately scrap the stamp duty it imposes on international airline insurance contracts.
"The duty not only contravenes Australia's international obligations but represents an unnecessary cost to international airlines," he said.
- AAP
