The contraction in Chinese airline traffic is worsening. Traffic is not only falling; the rate of fall is accelerating, with no sign in the latest monthly figures of a turnaround. Traffic is suffering particularly from a collapse in international passenger business — a result of the weak global economy, fuel surcharges and a visa clampdown since the Tibetan riots in March. But domestic traffic is now also contracting for all of China’s big-three airlines.

Qantas will merge with another major airline sooner rather than later, says departing CEO Geoff Dixon. “Other airlines are starting to merge and we must be part of that,” Dixon says. Although Qantas is the world’s 10th biggest airline, he argues that “we still are not big enough in five to 10 years to do it on our own. I believe it will be sooner rather than later.”

Fuel hedging and budget offshoot Jetstar have helped Qantas Airways Ltd to post a 46% rise in annual pre-tax profit for A$1.41 billion (US$1.22 billion). Traffic for the year was up 5% and yield 1.2%. Profit for the second half of the airline’s fiscal year, ending on June 30, was flat, despite the slowing global economy, but the company expects a drop of about 40% in its profit for the current year. Qantas said that hedging that covered 80% of its fuel consumption for 2007-08 helped the result, along with the performance of Jetstar.