Loss slightly narrower than prior year Underlying EBITDA in line...

• Loss slightly narrower than prior year
• Underlying EBITDA in line with market expectations
• Liquidity falls A$200 mln in two months

(Adds CEO comments, liquidity details)

SYDNEY, Aug 26 (Reuters) - Qantas Airways Ltd (QAN) reported on Thursday a slightly narrower annual net loss of A$1.73 billion ($1.26 billion) as its international fleet remained grounded because of Australia's closed borders.

The statutory loss for the 12 months ended June 30, including impairments and restructuring charges, was smaller than last year's A$1.96 billion loss, which was its second-worst ever.

Underlying earnings before interest, tax, depreciation and amortisation of A$410 million for the full year compared with its forecast range of A$400 million to A$450 million and was in line with the average A$410 million figure expected by 11 analysts polled by Refinitiv.

"International borders were essentially closed for the whole year, and there were only about 30 days when we didn’t face some level of domestic travel restrictions," Qantas Chief Executive Alan Joyce said in a statement.

The airline reported A$3.8 billion of liquidity as of June, down A$200 million from April 30.

The airline's domestic market had performed strongly in the fourth quarter when state borders, often closed at times of small COVID-19 outbreaks, had been largely open.

But the country's most populous city, Sydney, has been in lockdown since the end of June and the airline this month said it was temporarily idling about 2,500 employees without pay for at least two months as it cut capacity due to lower demand.

A quarantine-free travel bubble with New Zealand was suspended in late July, in a further blow to the airline.

Qantas' international fleet has been grounded since March 2020 except for freight and repatriation flights.

Australia set a target last month for 80% of adults to be fully vaccinated for a calibrated reopening of its international borders.

At present, just over 30% are fully vaccinated, though experts say it is possible the country could hit 80% by the end of the year as more doses of imported vaccines arrive. ($1 = 1.3744 Australian dollars)