Qantas profit falls 30% on higher fuel costs

business-times.asia1.com.sg :

Qantas Airways said annual profit fell 30% on higher fuel and redundancy costs and said it planned to slash more jobs, including more than 1,000 management and support staff. Chief executive Geoff Dixon said much of the savings Qantas would make over the next two years must come from labour costs. The airline, which has around 37,000 staff, retrenched 1,245 staff last year.

Qantas said its fuel costs rose 45% to A$2.8 billion. Like many other carriers, Qantas has introduced fuel surcharges to help offset rising fuel costs. Chief financial officer Peter Gregg said the company had increased its fuel hedging to 70% of its expected fuel needs for fiscal 2007 at A$70 a barrel. In June, it had contracts for around 50% of its expected fuel needs. It had A$282 million in hedging benefits last year.

- Hedging works but only to a certain extent. When it comes time to renew those contracts, it might well be at a much higher price (see below for earlier story). Also, I have been told that the duration of these hedging contracts have been getting shorter, eg instead of allowing hedging at a certain price for 3 years, the seller may only allow the buyer to hedge ahead for 1 year.

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