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Qantas reports dip in domestic demand, shares slide
[BENGALURU] Australia's Qantas Airways on Thursday reported lower revenue from its domestic routes, particularly at its budget carrier Jetstar, sending its shares tumbling almost 6 per cent to a near four-week low.
While revenue for its total business, which includes domestic and international operations, edged up 1.8 per cent to a first-quarter record, revenue in its domestic unit fell nearly 1 per cent.
"I think what's really concerned investors is that fall in domestic revenue, largely driven by a drop-away in Jetstar. This morning's drop also shows clear evidence that rising fuel costs have had an impact on overall profitability," said Michael McCarthy, chief market strategist at CMC Markets.
"Those two factors combined, along with the fact that Qantas was recently trading at an all-time high, appear to have hit the stock hard this morning."
Margins at Qantas and rivals such as Virgin Australia Holdings have been squeezed by higher fuel costs and weakness in consumer spending, as well as falling business confidence as economic growth in Australia falters.
This has forced carriers to cut costs and manage capacity to focus on more profitable routes.
Qantas' total capacity fell 0.2 per cent during the quarter, with its international business clocking a 0.6 per cent decline, while domestic booking saw a 0.5 per cent increase.
"Qantas International has seen significant upside from competitor capacity contracting more than anticipated, which is expected to continue for at least the remainder of the first half," the company said.
"Domestically, published competitor capacity is set to increase despite the weakness in the market. The Qantas Group will maintain its strategic position in all parts of the market and therefore our total domestic capacity is expected to grow by up to 1 per cent in the second half."
Qantas also flagged impact from unrest in the region, saying its interim profit could take a slight hit from anti-government protests in Hong Kong, while weaker freight demand would hurt its annual profit.
The carrier said its total fuel bill for fiscal 2020 could be as much as A$4.05 billion, compared with A$3.85 billion a year earlier.
The company's shares were 5.8 per cent lower at A$6.140 by 0028 GMT, their lowest level since Sept 25.