Struggling Qantas to axe 5,000 jobs

AIR TURBULENCE: Qantas, which suffered a first-half net loss of A$235 million, is working to slash costs by A$2 billion over three years.


    Feb 28, 2014

    Struggling Qantas to axe 5,000 jobs


    STRUGGLING Australian carrier Qantas yesterday said it will take measures, including cutting 5,000 jobs and ending its Perth-Singapore route, in a major shake-up after a first-half net loss of A$235 million (S$266 million), warning of more pain ahead.

    The airline, battling record fuel costs and fierce competition from subsidised rivals, is working to slash costs by A$2 billion over three years as it faces some of its toughest conditions.

    The carrier's underlying loss before tax in the six months to Dec 31 - the airline's preferred measure of financial performance - came in at A$252 million, a figure chief executive Alan Joyce called "unacceptable and unsustainable".

    "Hard decisions will be necessary to overcome the challenges we face and build a stronger business," said Mr Joyce, who will take a 36 per cent wage cut.

    Part of the restructuring will see 5,000 full-time positions lost from the carrier's 32,000-strong workforce by 2017, with 1,500 from management or non-operational roles.

    A wage freeze will be applied across the network until the airline returns to profit.

    "We will do everything we can to make the process easier for employees who leave the business," Mr Joyce said.

    "At the end of this transformation, Qantas will remain an employer of more than 27,000 people, the vast majority based in Australia - and we will be a better and more competitive company."

    The carrier also flagged "significant changes" to its fleet plans and network and a reduction in capital expenditure of A$1 billion across the next two financial years.

    This will see the selling or deferred delivery of 50 aircraft, including the early retirement of some of its Boeing 767-300s and six oldest Boeing 747-400s. Delivery of the eight remaining A380s it has on order will be put off to an unspecified date.

    Qantas said it will also axe its Perth to Singapore route and suspend new growth plans for its budget offshoot Jetstar in Asia.

    Following an interim profit warning in December, Moody's and S&P both downgraded Qantas' credit rating to "junk" status, increasing the cost of financing for the carrier and restricting access for investors who do not put their money in lower-rated companies.

    Qantas has since been working to convince the government it deserves a debt guarantee while lobbying Canberra for a relaxation of the Qantas Sale Act, which limits foreign ownership in the airline to 49 per cent.

    Mr Joyce argues that the cap is hurting Qantas' ability to compete by restricting access to capital, particularly against domestic rival Virgin Australia, which is majority-owned by state-backed Singapore Airlines, Air New Zealand and Etihad.

    Mr Joyce warned of more difficult decisions ahead.

    "To reach A$2 billion in cost cuts over three years, we have to work our assets harder, become more productive, retire older aircraft, and make sure that our fleet and network are the right size," he said.

    "We must defer growth and cut back where we can, so that we can invest where we need to. We have already made tough decisions and nobody should doubt that there are more ahead."