Qantas ventures hit by slump in volumes

Qantas’s most celebrated acquisition this decade, Star Track Express, has failed to live up to its high-growth promises.

Its full-year profits fell by more than a quarter.

The airline bought the road freight group in a 50:50 joint venture with Australia Post for $750 million in 2003, in a deal that has been its most concerted push into the express freight sector.

Qantas trumpeted the move at the time as helping its shares enjoy some of the much higher price-to-earnings ratios then enjoyed by logistics companies such as Toll Holdings, compared with the low ratios investors traditionally value airlines on.

But corporate filings show Star Track's net profit fell 29 per cent to $18.6 million for the year to June 30, due to a slump in freight volumes. Revenue fell slightly, to $617 million.

Its chief executive, Derek Lightfoot, said freight volumes had fallen as much as 12 per cent in some months in the aftermath of the global financial crisis.

''It's been extremely tough, no doubt about that. The January-to-June period was the most difficult in terms of volumes. Our results this year simply reflected the difficult trading conditions everyone experienced.''

Star Track's main competitors are Toll Holdings' IPEC and TNT.

Mr Lightfoot said freight volumes were still down slightly compared with the same period last year. ''We are cautious [about the outlook]. Each month we are getting closer to the same month as last year, but we are still not quite there.''

Star Track employs 3575 people and recently lifted a policy of not replacing staff. Qantas's investment in Star Track was part of the Geoff Dixon-led management's strategy of finding alternative revenue streams to its traditional passenger business. But the joint ventures have largely failed to live up to expectations.

Qantas's other main investment in the freight market with Australia Post is Australian Air Express, whose profit slumped to $119,000 for the year to June, a marked deterioration from the profit of $17.6 million the year before, or the 2006-07 profit of $30.2 million.

Qantas's corporate affairs chief, David Epstein, said Star Track remained an ''important part of our freight portfolio ... [and] there are no current plans to change the way the joint ventures are operated''.

The two joint ventures do not include Qantas's mainline freight operation, which mostly involves selling the cargo space in its jets.

Global air freight has been hit even harder by the worldwide economic downturn than the passenger side of airlines' operations.

Qantas Freight sunk to a $15 million loss this year, a reversal on a $51 million profit in 2007-08.

- © Fairfax NZ News