Qantas has just reported a statutory loss after tax of $2.843 billion dollars and an underlying loss after tax of $646 million for the year to 30 June.

The loss far exceeds market expectations, and was primarily driven by a massive write down in the value of the international fleet.

This is the top of the results document now available on the ASX site.

A fuller explanation of the results, dominated by a $2.6 billion writedown, are provided in this summary of its announcement.

Qantas group CEO Alan Joyce says that much of the loss comprises a writedown of $2.6 billion in the value of its international fleet because of its decision to hive off its chronically loss making overseas division.

He says some investors may find the numbers confronting, but they relate to last year, which is in the past.

Joyce says the move takes advantage of the opportunities provided by the change in the Qantas Sale Act allowing for a foreign airline to buy as much as 49 percent of the carrier.

Joyce predicts that Qantas will return to profitability in the next financial year, a claim he also confidently made on several occasions to the market and to the shareholder AGM in 2012.

The announcements are being received with incredulity and disbelief in advance of his addressing the press shortly.

Qantas has decided to keep full ownership of its Loyalty Program and not to open any new Jetstar ventures for the time being. It is unclear at this stage if this means Jetstar Hong Kong will be abandoned.

In his speech notes, not yet delivered, Joyce says there will be no major losses beyond the 5000 announced at the endc of February.

This is how Joyce describes the fleet write down provision of $2.6 billion

Joyce says the domestic capacity growth freeze it announced for the first quarter of this financial year will be continued to the end of this December.

Neither Joyce nor his CFO Gareth Evans would be drawn as to how the creation of the new structure to hold the international Qantas arm would work.

Evens said it created ‘optionality’ in which ‘external investors could be taken into Qantas at different levels’.

Asked if this could mean Qantas international might be separately listed with 49 percent foreign ownership neither executive would express a view.

Joyce said “we won’t offer a break down of the probabilities.”

The company had no news to report on the sale of either its Sydney or Melbourne domestic terminals but is still looking for the right price.

Joyce said, repeatedly, that the ‘worst is over’ and that the group would return to profitability in the first half of FY15, which is already two months gone.

He described the Emirates alliance as going absolutely fabulously, but gave no hard figures in support of that claim.

Evans said that Qantas had pushed back a number of its options for Boeing 787-9s from 2016 to 2017 but emphasised that they wouldn’t be exercised until international profitability had been restored, but said they offered important opportunities for fleet flexibility.

He made it clear that undelivered or unexercised orders and options for Airbus A320 NEOs  remained for Jetstar as aircraft from thec replacement of existing leased aircraft or future growth.

Joyce would not give a run down on the performance of Jetstar domestic other than to say it remained profitable, but said the total Jetstar loss of $116 million on an EBIT basis (a deterioration of  $254 million for the low cost franchise for the year) included a loss of $40 million on Singapore based Jetstar Asia and a loss of $70 million on Jetstar Japan.

Joyce also remained committed to Jetstar Hong Kong.

The deterioration of Qantas international for the year was by $251 million, taking it to a loss in the year to 30 June of $497 million.

Crikey’s Business Editor Paddy Manning will decode the Qantas numbers in the Crikey subscriber Insider today, and Plane Talking will review the performance of the Qantas management team and where the group is headed in a following post.

 

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