Qantas chairman Gary Pemberton told the annual meeting here that profit in the first four months of its year ending June 30 suggested the full-year target was not beyond reach.

But, he warned that already difficult trading conditions could deteriorate further over the rest of the year.

"If you stop the clock now there's nothing to indicate we can't reach that target, but we can't say we will because of instability in the market," Pemberton said after the meeting.

Conditions remained competitive on both international and domestic routes, and all international routes were showing signs of increased competition and pricing pressure.

Asian services, where Qantas quickly suspended routes last year in the face of drastic cuts in passenger numbers, were still suffering from reduced demand andweaker yields.

Pemberton reaffirmed this has been spilling over to Qantas's UK and European routes as hard-hit Asian carriers moved capacity to these routes and offer reduced fares.

Qantas managing director James Strong said there had been severe pressure on yield on such routes, including Australia-UK.

"The route that everybody loves to have a go at is the `Kangaroo Route', so there has been downward pressure," he said, referring to the Australia-Britain route.

Strong said most commentators believed Asia was now at the bottom, but said it would take time for the situation to improve, and, he could not rule out further cuts to capacity in Asia.

"Overall you could say that certainly there will probably be less expectation of withdrawals from Asia than there was over the previous year," he said.

"But, you certainly would not expect a quick return of any of those services on the other hand," he added.

Pemberton said Qantas's subsidiary operations were performing in line with expectations and hadbeen less affected than other operations by the problems in the broader market.

Cost savings were continuing with the emphasis more on the middle and lower levels of the organisation, such as ground staff, he said.