Tough market for Qantas

Profits despite strong competition, but jobs will go

Qantas, Australia's largest airline, has reported a sharp fall in profits, blaming high fuel costs, strong domestic competition and a weak Australian dollar.

To cut costs, the firm is axing all routes to China and Canada, along with other loss making international routes.

Profits fell by 22% to A$262m (£94.8m) but were within analysts expectations.

Higher fuel prices are projected to add A$170m to overall costs for the year.

After reporting record profits for the year to June, Qantas said the current trading environment "inevitably" called for job losses.

Jobs must go

Qantas says it plans to cut 220 management and 1250 other jobs, 5% of its staff, over the next six months to save A$100m.

The redundancies are the first part of a business review announced with the results.

Virgin Blue offering tough competition in domestic market

Competition in the domestic market from the launch in the last year of Sir Richard Branson's Virgin Blue and the rival Australia airline Impulse had also put pressure on profits.

Qantas chief executive-designate Geoff Dixon, who takes over in March, says he expects one of the rivals to drop out of the market in the next year.

Ownership plans

Mr Dixon also favours lifting Qantas' foreign ownership limit above 49% because it prevents it from competing efficiently on the world market.

Qantas is 25% owned by British Airways, whose Australian chairman, Rod Eddington, sits on the board.

Qantas is part of the One World alliance with BA and American Airlines and is rated the world's third safest airline behind Air Canada and rival Australian carrier Ansett.