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Qantas scales back growth plans as fuel bill bites

Qantas has revealed it will significantly cut back expansion plans as rising fuel costs and the impact of natural disasters around the world take a toll on the airline.

Alan Joyce, chief executive at the Australian flag-carrier said the airline was now planning for a 5.5 per cent growth in domestic capacity for 2011-12, compared with eight per cent previously.

Moreover, spending will slashed by AUS$400 million.

Investment will be reduced by some AUS£100 million in the second half of the present financial year, with AUS$300 million taken from the 2011/12 year.

“The Qantas Group has always taken decisive action to match capacity to demand,” said Joyce in a statement Wednesday.

“We are well-placed to retain our profit-maximising 65 per cent domestic market share.”

A fall in demand for domestic travel was cited as a key driver for the decision to reduce spending.

Aircraft lease plans will be reduced by Aus$300 million, added Joyce, with Qantas now expecting to take delivery of 34 aircraft in 2011-12 instead of the 43 previously announced.

Orders for 12 narrow-body jets will be cancelled or deferred, including three anticipated in the second half of this year.

A Year of Disasters

The announcement comes as an ash plume from Chile’s Puyehue volcano wreaks travel chaos in Australia and New Zealand, forcing widespread flight cancellations and delays that have stranded thousands of travellers.

Qantas suffered about Aus$80 million in losses due to flooding and cyclones in Australia earlier this year.

This followed an Aus$15 million hit from New Zealand’s Christchurch earthquake.

The deadly tremor and tsunami in Japan wiped another Aus$45 million from its balance sheet.

And a mid-air engine explosion over Indonesia last November forced it to temporarily ground its entire A380 superjumbo fleet at a cost of Aus$80 million in the current financial year.