Outgoing chief of Australia's Qantas says merger 'desirable'

Australia's Qantas said Friday it would be in the airline's interest to merge with rival carriers sooner rather than later as the 'flying kangaroo' was well-placed to see out the global financial storm.

Chief executive Geoff Dixon, who will step down later Friday after eight years at the helm of the country's biggest airline, has previously said consolidation was inevitable as the industry struggles against falling demand.

He told the company's annual general meeting in Brisbane that "the next step forward for Qantas will be to participate in consolidation of the aviation industry."

Ahead of the meeting, Dixon said he believed Qantas needed to merge.

"I think it's desirable, particularly in our current strong situation, so that we can be a major partner in that," he told the Australian Broadcasting Corporation.

"I do believe at some stage in the next few years, Qantas will end up in partnership with another airline, and Qantas is so strong now, it will be a major part of that partnership whereas 10 years ago, it would have been a minority part."

Qantas, which earlier this week forecast a 64 percent drop in annual profits and announced further capacity cuts to cope with the financial crisis, said despite the challenges of the global meltdown it was in a strong position.

Chairman Leigh Clifford told the meeting that the airline had seen a fall in bookings in recent weeks, particularly for international flights.

"Meanwhile, the aviation industry globally is restructuring and this will also exert competitive pressures on Qantas," he said.

"But few airlines can be better placed than Qantas to manage through this volatile era."

On Tuesday Qantas said it was prepared for a 64 percent drop in annual profits for the financial year ending June 30, 2009 due to a slowdown in demand related to the global credit crunch.

The airline said pre-tax profits for the year were forecast to be about 500 million dollars (330 million US), down from a pre-tax profit of 1.4 billion dollars the previous fiscal year.

Qantas also said it would cut capacity equivalent to the grounding of 10 aircraft.

Qantas' key rival Virgin Blue said Friday it was also reviewing its capacity growth forecasts due to weakening demand.

"Directors are continuing to assess a range of initiatives to ensure that we remain competitive," chairman Neil Chatfield told the airline's annual general meeting.

"Despite a recent easing of global oil prices which has brought some relief, the softening economic conditions are presenting a continuing challenge to our business."

-- Dow Jones Newswires contributed to this story --

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