Early this morning Australian time, Qantas Airways reported a net loss of A$244 million (approximately USD 255 million) for the 12 months ended June 30. It was the company’s first full-year loss in 17 years.
In the U.S., the biggest financial impact will be felt by The Boeing Company (NYSE:BA) as Qantas is cancelling orders for 35 new 787 Dreamliner planes. As of 2 PM EDT today, shares of BA have been trading down well over 2% on heavier than average volume. But the Dow Jones Industrial Average and S&P 500 are also down almost 1%.
Although the cancelled orders, reportedly valued at over $8 billion at list prices, will be a blow to Boeing, the effect is not expected to be that significant. With a strong market for commercial aircraft and a $374 billion dollar backlog as of June 30th, Boeing may barely feel the loss at all. What could be a bigger threat to its stock price are looming problems with the U.S. budget and potential defense cutbacks.
As for Qantas, investors welcomed news of the company’s spending cuts and turnaround plans. The company’s stock jumped 2.56% for the day.
In its press release, the company cited rising fuel costs, costs associated with a labor dispute which ultimately grounded the Qantas fleet for a while, and general operating conditions for the global aviation industry as factors hurting the profitability of its underlying business. But all parts of the Qantas group were profitable except for its international network. To try to return international operations to profitability, Qantas has initiated a turnaround plan. As part of this plan Qantas took a one-time charge of A$398 million which pushed the total company into a loss for the year.
The company reported significant progress in its turnaround efforts and expects to save A$300 per year when the plan is fully implemented.