Qantas cuts growth as service hit

15 June 2011 Last updated at 02:50 GMT Volcanic ash will add to problems for Qantas, says Siva Govindasamy of Flightglobal

Qantas airlines has cut its forecast for domestic growth as it faces various problems including the continuing disruption due to volcanic ash.

Australia's national carrier said it expected domestic capacity to grow by just 5.5% this year compared with the previous estimate of 8% growth.

Qantas cancelled all flights in and out of Perth as ash from the Puyehue-Cordon Caulle volcano in Chile spread further.

It has already suspended flights to and from Tasmania and New Zealand.

Flooding and cyclones earlier this year hit travel demand in Australia and the situation has been worsened by the current travel disruption.

'Capacity to demand'

Qantas said it was reducing its capital expenditure by 400m Australian dollars ($426m; ?260m) as growth had been slower than expected.

The company said it was also cancelling or deferring orders of 12 narrow-body aircraft.

"The Qantas Group has always taken decisive action to match capacity to demand," said Qantas chief executive Alan Joyce.

"With Qantas continuing to lead the premium market and Jetstar offering consistently low fares in the leisure market, we are well-placed to retain our profit-maximising 65% domestic market share," he added.

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