Qantas chief Alan Joyce pays penance for airline's suffering

Alan Joyce, the chief executive of the Australian carrier Qantas. AFP

Alan Joyce, the chief executive of the Australian carrier Qantas, will forgo his bonus and annual pay rise as yet another of the world's leading airlines suffers plummeting fortunes.

Qantas, which is due to report on Thursday, has forecast a 90 per cent fall in its profits for the year ending June 30, driven down by losses at its international operations and high fuel costs. Shares in the airline, which has also been hit by a series of strikes, have dropped 35 per cent since April.

Since the beginning of this year, a litany of doom has been coming from global icons including Cathay Pacific, Singapore Airlines, Lufthansa, Air France-KLM, British Airways and Iberia as profits are wiped out.

According to the International Air Transport Association (Iata), this will be the second year of declining returns since airline profits peaked in 2010 at US$15.8 billion (Dh58.03bn) with a net profit margin of 2.9 per cent. This year's projected $3bn in airline profits would yield a net profit of just 0.5 per cent.

It will be the established carriers, saddled with heavy pension commitments and outdated working practices that will suffer worst, said Tony Tyler, the chief executive of Iata.

At Qantas, analysts say losses are likely to have more than doubled to A$450 million (Dh1.72bn), with pre-tax profit for the year as low as A$50m.

"It's absolutely appropriate that when company returns go down, executive pay should go down as well," Mr Joyce said. "It has been an extremely tough year for Qantas shareholders and what we want to show is that my pay has to have a huge correlation with the profitability of the company."

Shares in Qantas dipped below A$1 for the first time this month and the airline has announced plans to split its international and domestic operations as well as job cuts. International Airlines, which owns British Airways and Iberia, will struggle to make a profit this year because of a €1bn (Dh4.53bn) jump in fuel costs.

Cathay Pacific this month posted an unexpected first-half net loss of HK$935m (Dh442.7m) for the six months to June, compared with a profit of HK$2.8bn during the same period last year. Analysts had forecast a profit.

"Increased fuel prices significantly affected the profitability of our passenger services, particularly on long-haul routes," the Hong Kong-based carrier said.

"Demand for premium-class travel also fell during the period, in response to economic uncertainty."

Europe's biggest airline, Air France-KLM, also reported widening losses this month as a result of redundancy payouts. The Franco-Dutch carrier lost €895m in the three months to June, against a €197m loss a year earlier.

It took a one-off charge of €368m to cover redundancy payments as part of plans to cut 10 per cent of its workforce. Last month, Air France-KLM announced plans to cut more than 5,000 jobs.

Lufthansa, meanwhile, was forced to cut expansion plans to safeguard profits. The German carrier's fuel costs were up 22 per cent in the first six months of this year.

It now plans to reduce capacity by 2.5 per cent for winter 2012-2013, decommission 25 aircraft, cut 3,500 jobs and keep an investment freeze in place for at least another six months.

Even so Lufthansa still expects operating profit this year to decline from €820m last year.

Although Singapore Airlines (SIA) swung to an overall quarterly profit to June, from a loss in the preceding three months, analysts said the outlook for the airline was still challenging.

In the fiscal first quarter ended in June, SIA earned S$78m (Dh228.6m), up 73 per cent from a year earlier, thanks to higher passenger carriage. In the previous three months, the airline posted a net loss of S$38.2m. It now plans to introduce revamped seats and cabin interiors in a bid to stay ahead of Asian and Middle East rivals in the premium travel market.

"In this business, if you are staying still, you are moving backwards," said Tan Pee Teck, SIA's senior vice president for products and services.

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