Qantas ups profit forecast ahead of buyout vote

SYDNEY (Reuters) - Australian buyout target Qantas Airways Ltd. (QAN.AX) raised its annual profit forecast for the third time in six months as fuel prices ease and demand for travel increases.

The airline, which is being courted by a consortium led by Macquarie Bank Ltd. (MBL.AX) and Texas Pacific Group (TPG.UL), said pre-tax earnings would rise 30-40 percent this year if it continued to cut costs and attract more passengers.

Lower oil prices were expected to improve earnings in the second half of the year after Qantas reported a 2 percent rise in first-half earnings as solid demand and cost cuts partly offset higher fuel costs.

Analysts said there were few surprises in the results which were overshadowed by the $8.7 billion takeover of the national icon. The deal still needs to be approved by shareholders and faces political hurdles.

"The real battle to be won is with the traveling public, unions, other members of the community and therefore the politicians. I think the takeover will go ahead on balance but there will be some conditions in respect to jobs and safety," said Fabian Babich, an analyst at brokerage BBY.

Qantas shares were flat at A$5.36 in a slightly firmer broader market (.AXJO).

Qantas declared a special dividend of 15 cents. Shareholders will receive the dividend, plus A$5.45 in cash, if the A$5.60 per share offer is successful, it said.

Australia's largest airline said July-December net profit rose to A$358.7 million ($280 million) from A$352.8 million a year earlier.

"We believe the full-year result will be around 30-40 percent higher than last year's ... subject to fuel costs not increasing significantly, demand continuing to grow and cost reductions not achieved in the first half being realized in the second half," Qantas said in a statement.

In December, Qantas had tipped full-year pre-tax profit growth of 25-30 percent.

Qantas shareholders have until March 9 to vote for the offer from Airline Partners Australia (APA). The consortium this week lodged an application with the Australian government's Foreign Investment Review Board to review the takeover.

Treasurer Peter Costello has the right to reject applications to the FIRB if he considers an investment to be not in the public interest.

Chief Executive Geoff Dixon, who will continue to run the airline after the takeover, said Qantas expected its full-year fuel costs to rise A$660 million to A$3.5 billion this year.

Qantas, which has been cutting jobs and expanding its low-cost subsidiary Jetstar, wants to accelerate its cost-reduction program.

Chairman Margaret Jackson said the offer was "the best opportunity for shareholders to realize significant value for their investment in Qantas."

($1=A$1.28)