Quantas has said its profits will fall by up to 90 per cent, sending shares to their lowest ever level.
The Australian airline blamed an unexpectedly high fuel bill, greater competition on domestic routes, and the eurozone crisis for the dramatic fall in expectations.
"The forecast result reflects the recent deterioration in global aviation operating conditions driven by the European economic crisis, the Group's highest ever jet fuel bill, and substantial capacity increases in the domestic market that have reduced yields," Qantas said in a statement.
Shares dropped by 18 per cent after the profit warning.
The firm said that losses in the international division would double over the financial year, with slowing demand and higher operating costs. The division was also damaged by strikes in the previous year, which lead to the company grounding its fleet, losing it millions of dollars.
Quantas is taking measures to stem losses, reducing the number of international routes offered and announcing plans to cut jobs.
However, analysts say the company will struggle to meet profit targets in an unpredictable economic climate.