Difficult conditions in the global aviation market has seen Qantas Airways Ltd report a 72 per cent slump in first half profit and scrap its interim dividend.
The national carrier's net profit declined to $58 million in the six months ended December 31, from $210 million in the previous corresponding period.
On a pre-tax basis, the profit was $90 million, which was in the middle of the airline's forecast range of $50 million to $150 million.
Chief executive Alan Joyce defended the soft result, contrasting Qantas' profitability against global aviation industry losses.
He pointed to the group's preferred profit line - underlying profit before tax - which was $267 million in the first half, saying Qantas would in future focus on the measure because it better reflected its operational performance and could be more accurately forecast.
For the 2009/10 year, Qantas expects to report a pre-tax underlying profit of $300 million to $400 million, after absorbing an expected higher fuel cost of $200 million in the second half.
Qantas scrapped its first half dividend payout, saying it was not prudent to declare one.
"While the operating environment has been unprecedented and challenging, this result reflects the strength and diversity of our operations," Mr Joyce said in a statement on Thursday.
"In this context, coupled with significant capital expenditure program associated with fleet renewal, the board considers it prudent not to pay an interim dividend, and future dividends will be assessed against ongoing earnings performance and capital requirements."
First half revenue totalled $6.91 billion, down from $8.07 billion in the prior corresponding period.
Mr Joyce said Qantas had made tough decisions during 2009, cutting capacity and costs to improve yields.
"Our two-brand strategy, focused on growing the full service, premium Qantas and low fares Jetstar, is not only delivering benefits to our customers, but also to our shareholders," he said.
"Qantas, in particular, has benefited from the capacity reductions and restructuring activities implemented since April 2009, with substantial cost savings achieved during the current half year
"Jetstar continues to provide the group with true diversity, and our broader portfolio of assets with a unique strength and range of revenue growth opportunities."
Mr Joyce said uncertainty remained, particularly in regard to international markets, industry capacity, passenger and freight demand, and high levels of volatility in fuel prices and exchange rates continued.
"At current prices, fuel costs are expected to be approximately $200 million higher in the second half compared to the first half," he said.
"In addition, depreciation costs will be approximately $50 million higher in the second half due to a reassessment of aircraft residual values."
Mr Joyce said the key drivers of the first half result had been weaker domestic and international demand, due to the global economic downturn, and lower fuel surcharges that led to a 14.9 per cent decline in yield.
Lower capacity partially offset by an increase in seat factor (or load) of 2.7 points and average fuel prices were 38 per cent lower, which contributed to a net $486 million decline in fuel costs.
Qantas said cost savings and benefits from prior year restructuring contributed to an 11 per cent fall in operating expenses, excluding fuel.
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