Qantas has cancelled an order for 35 Boeing Dreamliners after posting a worse than expected loss of A$244 million.

The airline is blaming the result on high fuel costs, a damaging labour dispute and intense competition on its international routes.

It is its first annual loss in at least 17 years and A$20 million ($25 million) more than six analyst estimates compiled by Bloomberg.

Pre-tax profit of A$95 million was higher than expected, according to one analyst and the airline's share price was up A4c yesterday at A$1.21 in afternoon trade.


Qantas' fuel costs were up A$645 million to A$4.3 billion in the year to June 30 and the cost of the labour dispute and subsequent short-term grounding of the airline last year was put at A$194 million.

Chief executive Alan Joyce said fuel costs were expected to rise in the current year but the airline was not making forecasts for the coming year.

"With this volatility in global conditions, fuel and foreign exchange rates, as well as the ongoing internal transformation we have under way, it would be imprudent to offer profit guidance at this time."

The cancellation of the Boeing 787-9s - worth US$8.5 billion at list prices - will benefit the airline by US$355 million this year.

It is believed to be the largest single cancellation of the fuel- efficient aircraft and a blow to Boeing which has suffered delays delivering the Dreamliner.

The airline still plans to take delivery of 15 787-8s in the second half of next year for its subsidiary Jetstar and has retained options and purchase rights to 50 787-9s

All parts of the group were profitable apart from Qantas' international network which delivered an underlying loss of A$450 million.

During the year it withdrew from major loss-making routes including the Auckland-Los Angeles service.

Qantas is splitting its international business from its profitable domestic business which includes Jetstar, consolidating heavy maintenance work and slashing 2800 jobs.

One bright spot for Qantas was Jetstar's performance. The budget airline, which makes most of its revenue in Australia, returned an underlying profit of A$203 million, up 20 per cent on the previous year.

Although the performance of Jetstar in New Zealand is not broken out, the airline said last month it has recorded strong growth here this year.

Air New Zealand reports its full-year result next Thursday.