Qantas forecast slides

Smith Barney has lowered its earnings forecasts for Qantas, saying a lower Australian dollar would make fuel more expensive.

Smith Barney retained a "buy" rating on the stock, saying Qantas was "one of the most attractive airlines globally."

"We believe Qantas remains undervalued relative to other major local and international airlines," analysts said in a research note.

"Qantas remains better placed than most in relation to rising fuel costs, with fuel surcharges likely to raise about A$1 billion ($1.08b million) in fiscal 2006. We believe Qantas has a quality brand, respected management, and a well-defined strategy to further reduce costs," it said.

Still, Smith Barney cut its net profit forecast for the year to June 30 by 3.6 per cent. It gave a 12 month target share price of A$4.41, down from a previous A$4.55.

The changes reflected lower currency assumptions, with an expected Australian dollar of 76USc, versus a previous 77USc, lifting its fuel bill.

Delays in the delivery of Airbus A380s to Qantas were expected to have little, if any, financial impact.

- REUTERS