Qantas road freight operation comes under scrutiny

QANTAS has posted a net profit of A$210 million (US$137.6 million) for the six months to December 31, but has come under fire for investing hundreds of millions in a road freight venture that only contributed A$6 million to the carrier's first half profit.

Qantas acquired a 50 per cent stake in Star Track Express for A$375 million in late 2003 in a partnership with co-owner Australia Post.

Worse still, Qantas's other joint venture with Australia Post, Australian airExpress (AAE), suffered a loss of A$2 million during the reporting period, reports The Melbourne Age. The carrier attributed the loss to last year's surge in oil prices and now the global economic slowdown, which is prompting some of its freight customers to switch from air freight to cheaper road freight.

Said Qantas investment chief Grant Fenn: We've been very happy with our Star Track investment. That doesn't mean the businesses aren't battling the economic times, said Mr Fenn, who also oversees Qantas freight businesses.

We're very positive about that business and have been since we bought it and it's going very, very well for us, he said.

In the 12-month period to June 30, 2008, AAE's net profits amounted to A$17.6 million, down from A$30.2 million a year earlier, a decline that some industry experts attribute to stiff competition from Toll's air freight division which has also poached several of its senior executives, the report said.

It noted that in the first six months of last year, Star Track posted a net profit of A$26 million, down A$8 million compared to the same period the previous year.

Its earnings before interest, tax, depreciation and amortisation (EBITDA) came to about A$88 million.

As for talk of Qantas selling off its air freight operations going quiet in recent times, Mr Fenn said, I think freight at the moment is seen very much within the business and something we would want to hold.

But in the future that could change.

Source: Transportweekly