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Qantas warning highlights Aussie air wars

By Phil Boeyen, ShareChat Business News Editor

Wednesday 28th March 2001

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Australia's turbulent airline industry has been knocked again with market leader Qantas issuing an earnings warning.

The airline's CEO, Geoff Dixon, says when the company released half-year results in February it said that the competition in the industry was placing pressure on future results, but things have taken a turn for the worse since then.

"The past two weeks has seen a substantial increase in the level and range of discounting on domestic routes. This will result in a further reduction in our yields.

"The Australian dollar has continued to weaken to record levels, putting further pressure on travel ex-Australia and on our costs. As well, the overall slowing in the Australian and international economies is having a negative effect on both domestic and international business travel making it difficult to forecast outcomes at this time.

Mr Dixon says the company is predicting results for the full 2001 financial year will be significantly impacted.

The announcement from Qantas does not bode well for Air New Zealand's (NZSE: AIRVA) subsidiary, Ansett, which is also caught up in Australian price-slashing.

Although Ansett has less exposure to international markets than Qantas, it will still be hit by the drop in the Aussie dollar which will push up fuel expenses.

Former Qantas executive and now Air New Zealand boss, Gary Toomey, is currently grappling with how to get Ansett back on track following a significant fall in revenue since it was acquired by the New Zealand carrier.

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