Australia's Qantas Airways on Thursday reported a 2.5 percent fall in second-half profit on high fuel prices, but predicted it would meet forecasts for the current year.

Like other airlines worldwide, Qantas hit tough times in the second half of the year ended June 30, as soaring oil prices and softer demand for travel in some key markets took their toll. But it said it was better placed than almost any other airline to meet the challenges facing the industry.

On Tuesday, Qantas's main domestic rival, Virgin Blue, reported a 55 percent fall in 2008 profit on high fuel prices, cut its dividend and painted a gloomy outlook, sending its shares tumbling.

"This is a tough industry and this is by any stretch of the imagination a pretty good result," chief executive Geoff Dixon told a results briefing.

"Very few countries in the world have what Australia has at the moment, which is effectively viable airlines across the board, including obviously Virgin."

Airlines around the world have been cutting capacity, scrapping growth plans to battle high fuel costs, with the International Air Transport Association forecasting a loss for the industry worldwide.

The crude oil price has fallen 20 percent since peaking near USD$150 a barrel in mid-July, but it has not muted the cries of the airline industry, with Virgin Blue warning that it expected the year ahead to be its most challenging yet.

And on Wednesday, the International Air Transport Association's boss told a Sydney luncheon that "at least 25 airlines have gone bust" in recent months and that the industry was still on course to lose up to USD$6.1 billion this year.

Qantas made a net profit of AUD$351.4 million for January-June, down from AUD$360.4 million a year earlier.

"Assuming no further deterioration in economic conditions, Qantas expects its 2008/09 profit before tax to be broadly in line with analyst consensus forecasts," it said in a statement.

Analysts are expecting a pre-tax profit of AUD$743 million in the year ahead, about half the AUD$1.4 billion reported for 2007/08.

Qantas warned that its fuel expenses would be more than AUD$1.6 billion higher in 2008/09 but said it had hedged 81 percent of its crude-oil exposure at a worst-case all-in cost of USD$118 per barrel. Crude currently fetches around USD$116 a barrel.

Qantas also raised its dividend, declaring a final payment of 17 cents a share for a full-year payout of 35 cents, up from 30 cents in 2006/07.