Qantas has racked up a massive $2.8 billion loss, but insists the worst is behind it as it prepares to split its ailing international business from its domestic arm.
The airline's profit-draining battle with rival Virgin and another poor performance by its international division were the main culprits behind the loss for the 2013/14 financial year.
The loss, the worst in the airline's history as a public company, compared to a $1 million profit a year ago.
Qantas was dragged into the red by a $2.6 billion writedown to the value of its ageing fleet of Boeing 747s and A380s.
Excluding the writedown and other one-off costs, Qantas made a better-than-expected underlying pre-tax loss of $646 million, compared to a $186 million profit a year ago.
Chief executive Alan Joyce described the result as "confronting", but said the massive loss represented the year that is past.
"We have now come through the worst," he said on Thursday.
Domestiv and international arms to be split
Qantas has been aggressively cutting costs as part of a $2 billion turnaround plan announced in February.
So far it has cut 2,500 jobs out of a planned 5,000, retired old planes, slashed spending, cut routes, and made changes to its engineering division.
It now plans to split its domestic and international arms, creating a new corporate entity for Qantas International.
Mr Joyce said the Qantas Sale Act, recently passed by the federal parliament, had paved the way for the split.
"This will have no impact on the day-to-day operations, network or staffing at Qantas International," he said.
The international division more than doubled its underlying loss to $497 million amid increased competition and record fuel costs.
Losses at discount carrier Jetstar hit $116 million as losses from its Asian operations offset profits from its Australian division.
Qantas' domestic arm also saw its underlying earnings slump from $365 million to $30 million as a result of a bruising capacity war with rival Virgin.
The airline has been increasing capacity in an effort to maintain its 65 per cent market share against a challenge from Virgin.
Despite the loss, Qantas' shares were up by 6.5 cents to $1.36 by 1036 AEST.
IG market strategist Evan Lucas said while the headline loss was the worst ever posted by Qantas "by a country mile", there was some relief about splitting its international and domestic businesses.
"There is a huge clearing of the decks," he said.
"They're finally looking like they can split out the issues around foreign investment, diluting the exposure to the domestic market with this international split," he said.
But not all were pleased.
Calls for Joyce and board members to be sacked
Former Prime Minister Malcolm Fraser lambasted Mr Joyce for the massive loss.
"Qantas chief Alan Joyce has many questions to answer. Board made foolish decisions, being eaten by Emirates," he said in a tweet.
And the Australian Services Union called for Mr Joyce and his fellow board members to either resign or be sacked.
"Today's loss is the result of poor management and lack of board direction which has taken Qantas from being one of the world's most profitable airlines to being one of the least in just a few short years," assistant national secretary Linda White said.
Meanwhile, Qantas has ruled out selling or floating its profitable frequent flyer business, Qantas Loyalty in order to fund its turnaround.
Senator calls for ASIC probe
Independent senator Nick Xenophon has asked the corporate watchdog to investigate whether Qantas breached its continuous disclosure requirements.
Under corporate rules, companies must publish information relevant to share prices so that all shareholders have equal access to the information.
"Qantas has admitted to me via a Senate inquiry process that it has had commercial-in-confidence briefings with institutional investors," Senator Xenophon said.
"My question to ASIC is whether this breaches Qantas' obligations in terms of continuous disclosure to the share market."
Senator Xenophon said he was curious why institutional investors had not "made a squeak" about the crisis in Qantas.
"You would expect them to be baying for blood," he said.
"It makes me wonder what information institutional investors may have received in these meetings."
But Opposition Leader Bill Shorten is confident Qantas has a future and hopes the worst is behind the flying kangaroo.
"I'll keep flying Qantas, Australians will keep flying Qantas," he told reporters in Canberra on Thursday.
Mr Shorten noted that the company was not planning any further job losses over the thousands previously announced, which he described as a silver lining on a difficult day.
"Hopefully the worst is behind them."
The Greens say the Abbott government must share some of blame after refusing Qantas pleas for a debt guarantee.
"Tony Abbott has turned his back on an airline that clearly needs assistance," deputy leader Adam Bandt said.
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