MELBOURNE: Qantas Airways Ltd., Australia's biggest airline, will scrap first-class cabins on most routes after a slump in demand for the most expensive seats led to a 72% drop in first-half profit.

The shares fell the most in almost a year after the Sydney- based carrier said net income was A$58 million ($52 million) in the six months ended Dec. 31, missing the A$82 million median estimate of five analysts surveyed by Bloomberg News. Changing seats and upgrading inflight entertainment will cost A$400 million and start next year, Qantas said in a statement today.

The cabin changes come as business customers are shifting to economy class or the company's discount carrier Jetstar, where earnings almost tripled, as corporate travel is cut back. Annual pretax earnings will rise to as much as A$400 million compared to the year earlier result of A$120 million.

"This new guidance may provide some disappointment to consensus profit before tax estimates of A$530 million," Phil Campbell, an analyst at Citigroup Inc., said in a note to clients today.

Qantas shares fell 4.7% to A$2.83 at 10:33 a.m. in Sydney trading.

First-half pretax profit was A$90 million, compared with the company's Dec. 21 forecast for earnings between A$50 million and A$150 million. Sales fell 14% to A$6.9 billion. The airline's namesake carrier, its biggest unit, posted first- half earnings before interest and tax of A$60 million, a decrease of 39%.

Discount Carrier

Jetstar, Qantas's discount carrier, almost tripled earnings to A$121 million from A$43 million a year earlier as customers switched to cheaper flights.

Qantas has more than 65% of Australia's domestic air-travel market, compared with about 30% for second- ranked Virgin Blue Holdings Ltd.

The carrier expects to curb costs and fuel use by flying more direct routes, using more fuel efficient aircraft and cutting the time airplanes take to taxi from the gate to the runway. Qantas will spend A$400 million on reconfiguring Airbus SAS A380s and Boeing Co. 747-400 planes in addition to new inflight entertainment systems.

Earnings at Qantas's frequent flyer program more than doubled to A$157 million from A$73 million a year earlier.

Freight earnings dropped 65% to A$17 million.