Nick Falconer

Qantas shares grounded

SHARES in Qantas have nosedived on the back of the Australian airline downgrading its profit forecast.

Qantas issued a statement on Tuesday indicating its underlying before-tax profit for the year to June 30 would be in the range of $50-$100 million, a significant drop from last year's $522 million profit.

"The forecast result reflects the recent deterioration in global aviation operating conditions driven by the European economic crisis, the group's highest ever jet fuel bill, and substantial capacity increases in the domestic market that have reduced yields," the statement read.

Investors did not react well to the news, driving Qantas shares down almost 16% to an all-time low of $1.20 as of noon on Tuesday.

The company's international arm is expected to post a loss of $450 million for the financial year, compared to $216 million in 2010-11.

"The structural issues in the business have been compounded by the impact of global economic factors - including increased fuel costs, the high Australian dollar and weakness in the UK and Europe market - as well as the $100 million one-off cost of industrial action," the statement read.

On the domestic front Qantas and Jetstar are expected to deliver improved earnings of more than $600 million.

"This strong result is despite industrial action, record fuel costs and aggressive competitor capacity increases."

Meanwhile, the Australian stock exchange is showing signs of recovery after more than $23 billion was wiped from the market on Monday. The All Ords was up almost 50 points as of noon to 4082.7.