Qantas Airways Ltd.’s first-half earnings dropped 7.5 percent as overseas competitors rolled out more routes and international air fares fell.

Underlying profit before tax in the six months ended Dec. 31 dropped to A$852 million ($656 million) from A$921 million in the same period a year earlier, Australia’s largest carrier said in a statement Thursday. Qantas had estimated profit of between A$800 million and A$850 million.

Chief Executive Officer Alan Joyce is in the final six months of a three-year turnaround plan. While he’s delivered record profits and reinstated a shareholder dividend, he’s also facing greater competition, as overseas airlines take advantage of cheaper fuel.

“In the international market, conditions are challenging,” Joyce said in the statement. “Cheaper oil has led to strong capacity growth on international routes — pushing fares down and impacting all major airlines.”

Revenue at Qantas in the first half slipped 3.3 percent to A$8.18 billion. The carrier, which reinstated dividends last year after a seven-year hiatus, said it will pay an interim dividend of 7 cents a share.

Qantas’s main domestic rival, Virgin Australia Holdings Ltd., last week said demand was subdued and it was hard to see that changing any time soon. Virgin reported a loss and deferred initial deliveries of a 40-plane order from Boeing Co. worth $4.4 billion.

Underlying operating profit at Qantas’s international division fell A$62 million to A$208 million and was down A$16 million to A$371 million at its domestic business.

All the same, Qantas said it’s on target to deliver A$2.1 billion in savings by the end of June from Joyce’s turnaround program. From then on, Qantas is targeting an annual average of A$400 million in cost and revenue benefits, Joyce said.

After ditching some unprofitable long-haul routes to Europe, Joyce is focusing on shorter legs within Asia. Last month, Qantas resumed services to Beijing from Sydney for the first time since the global financial crisis.

This year, Qantas will receive the first of its eight Boeing Dreamliners and in 2018 will start the world’s first direct flights between Perth and London, a 17-hour non-stop flight.

©2017 Bloomberg L.P.

This article was written by Angus Whitley from Bloomberg and was legally licensed through the NewsCred publisher network.

Photo Credit: A Qantas Airbus A330 in flight. The company made a profit of about $650 million (U.S.) in the second half of 2016. Qantas