Qantas screwed down its profit forecast and flying activity to new lows this morning, but it is still the sort of bad news most other airlines in the rest of the world would die for. The key points:

It expects a profit before tax of “around $500 million” in the current financial year, compared to the record $1.408 billion in the 12 months to June 30 this year.

Flying activity will be reduced by the equivalent of grounding 10 aircraft, but this will mean actual flying over the next six months will offer only 4% less seats than the same period in 07-08.

The additional cost of fuel for Qantas and Jetstar in this financial year has been revised downwards to $750 million, compared to fears it could have gone up by more than $2 billion when oil prices surged from mid May until the global financial crisis caused them to slump significantly from this October.

Qantas CEO Geoff Dixon, who is replaced by Alan Joyce this Friday at the end of the company’s AGM, said reduced utilisation of its fleet gave it “the flexibility to switch growth back on as soon as market conditions improve.”

This won’t go unnoticed at Virgin Blue, where capacity has been reduced by delaying orders, or sending jets to New Zealand, which shuts it out of any fast recovery in Australian air travel, should one happen contrary to the current pessimistic forecasts.

The Qantas investment in downside hedging protection, which is expensive, is looking better too. CEO designate Alan Joyce says that at current low fuel prices it has “an 86% participation in falling fuel prices for the remainder of the year.”

Or in other words, it won’t continue to pay a hedged value way above the current low prices like some overseas carriers who locked themselves in at around twice the going price with ruinous consequences.

Qantas is currently 97% hedged at a worst-case crude oil hedge rate of $US106 per barrel including option premium.

There is no mention of one of the burning fears of the airlines at the moment, a busted hedge fund, given the reported loss of around $US500 million suffered by Cathay Pacific when Lehman Bros went broke, taking the money and the fuel with it.

The latest Qantas guidance is light on detail about currency hedging, another area of seriously unpredictable risk.

But the risk of Qantas passengers, especially those on the Perth transcontinental flights, being stuffed around by geriatric older-model 747s has been physically reduced this week with one of them being flown to an aircraft graveyard near Death Valley.

Qantas has around 40 front line jets it would like to abandon because they are entering the terminally costly zone of elderly aircraft maintenance, which is no longer one of its great competencies anyhow.

But some of these flying liabilities were supposed to have been close to replacement by super-efficient 787 Dreamliners, the nightmare project that came to a production halt in Seattle today as more evidence of incompetent management and assembly came to light.

The Dreamliners are still without a flight testing timetable and performance and delivery guarantees and Qantas could be stuck with its duds for another three years.