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Qantas warns on oil price impactBy Geoff Hiscock YOUR E-MAIL ALERTSSYDNEY, Australia (CNN) -- Australian airline Qantas has flagged tougher times ahead, saying the extraordinary cost of jet fuel means it is unlikely to repeat the record net profit of Aust. $763.6 million ($578.5 million) it announced Thursday. It also has foreshadowed the possibility of another fuel levy on passengers, saying its fuel bill will rise by Aust. $1.25 billion over the next year. The airline is one of the most profitable in the world, with a jump of 18 percent in net earnings in the year to June 2005. But like other carriers it has seen costs soar on the back of record oil prices of $67 a barrel. Qantas CEO Geoff Dixon said Thursday that fuel represented the airline's greatest challenge over the next two years, and said a decision would be made in the next few days whether to apply another levy on passengers. The last surcharge was in April. Dixon said fuel accounted for 19 percent of Qantas operating costs in the year to June 2005, up from 15 percent a year earlier. In the year ahead, that would rise to almost 30 percent, adding A$1.25 billion to the airline's costs. "We do not expect to achieve the same levels of profitability in the current (2005-06) financial year," he said. Despite Dixon's warning on profitability and the need for continued efficiencies, he said the airline was in a very strong position relative to its rivals. "It (the profit of A$763.6 million) is not a bad result for an airline. But it is an ordinary result for an industrial company," he told a news conference. Dixon also said Qantas would spend up to Aust. $20 billion ($15.4 billion) in the years ahead, buying as many as 100 new widebody jets to renew its fleet. Dixon declined to say when the new jets would enter service, but said Qantas was asking Boeing and Airbus to submit proposals for a variety of aircraft options, including the Boeing 787 and 777, and the Airbus A340 and A350. "It is an advantage for us to buy these fuel-efficient widebody aircraft as soon as possible," Dixon said. The fleet renewal program is the biggest since 2000, when Qantas said it would buy 12 of the new Airbus A380 super-jumbo, 13 Airbus A330s and six Boeing 747s. It later added B737, A330 and A320 aircraft to that program. Dixon also flagged further job losses as part of transforming the company, but said overall Qantas had created 10,000 jobs in the past decade. About 200 managers have been made redundant this month, and cost-cutting measures include basing staff overseas. "We are a global airline with 93 percent of our staff in Australia. We will avoid sending jobs offshore if we can," he said. Dixon said Qantas was pleased that it would know by the end of the year the Australian government's attitude on aviation policy, including the question of allowing rivals such as Singapore Airlines to compete on the trans-Pacific route that is a major money earner for Qantas. Qantas has been lobbying against Singapore Air's entry on the route, without first reviewing other policy areas including foreign ownership limits on Qantas, capital raising, accelerated depreciation allowances and market access in general. The Australian government has promised Singapore it will decide on trans-Pacific access by the end of 2005. Dixon again lashed out at distortions in global aviation arising from government ownership, subsidies and guarantees. He said seven of the eight major competitors to Qantas had government backing of some sort. The other competitor was in Chapter 11 bankruptcy protection. Qantas shares are 1.2 percent higher to A$3.22 at midday Thursday. Discount rival Virgin Blue, which has about 30 percent of the domestic market and competes with Qantas on routes to New Zealand, is up 0.6 percent to A$1.65. The broader Australian market, measured by the S&P/ASX200, is down 0.2 percent.. 
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