Airfares to skyrocket

Qantas chief executive Alan Joyce says it is inevitable airfares will have to increase in 2010 from "unprecedented low levels"...

He said current airfares rates are "understandable", given forecasts the aviation industry will lose $US5.6 billion ($A6.22 billion) in 2010.

"I think we have had unprecedented low airfares out there because of the economic condition and the level of capacity that's there," Mr Joyce told reporters on Thursday.

"I think airfares and yields are improving, they have to improve going forward in the international markets because most of the international industry is losing money."

The International Air Transport Association (IATA) estimates airlines will lose $US5.6 billion ($A6.22 billion) in 2010, although this would be an improvement from an estimated $US11 billion ($A12.23 billion) in losses in 2009.

"That's not suitable on these average airfares so we know they have to increase," Mr Joyce said.

Mr Joyce said the operating environment still remained tough for the aviation industry.

He said Qantas's major international markets such as the US and UK remained weak, but its domestic operations were improving.

"We did see some weakness in some of our international markets but currently the first half of this financial year is a lot better than the second half of last financial year, so the trend is going in the right direction," Mr Joyce said.

Earlier on Thursday, Qantas reported a 72 per cent slump in first half profit and scrapped its interim dividend.

The national carrier's net profit declined to $58 million in the six months ended December 31, from $210 million in the previous corresponding period.

On a pre-tax basis, the profit was $90 million, which was in the middle of the airline's forecast range of $50 million to $150 million.

For the 2009/10 year, Qantas expects to report a pre-tax underlying profit of $300 million to $400 million.

Qantas reported an underlying profit before tax of $120 million in 2008/09.

Source: AAP