Qantas to cut 5,000 jobs as losses mount

Qantas has confirmed plans to cut 5,000 jobs and reduce its fleet size, after posting a pre-tax loss of AU$252 million (US$227m) for the first half of its financial year.

The job losses, which will be implemented between now and 2017, form part of a broader plan to reduce company expenses by AU$2 billion, which will also see Qantas sell off assets, including aircraft and airport facilities. The airline has already reached an agreement to end its terminal lease at Brisbane Airport, and it also plans to sell or defer the delivery of 50 aircraft. It added however, that “no final decisions have been made on other assets”.

Qantas CEO Alan Joyce blamed the situation on the “uneven playing field in Australian aviation policy”, whereby other airlines, notably Virgin Australia, can receive investment from international airlines backed by overseas governments.

“We are facing some of the toughest conditions Qantas has ever seen,” Joyce said. “The Australian domestic market has been distorted by current Australian aviation policy, which allows Virgin Australia to be majority-owned by three foreign government-backed airlines and yet retain access to Australian bilateral flying rights.”

He added that the major cost-cutting efforts being undertaken by Qantas over recent years have not been sufficient to improve the airline’s performance.

“We must take actions that are unprecedented in scope and depth to strengthen the core of the Qantas group business,” Joyce said. “To reach AU$2bn 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. 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,” he added.

In terms of the fleet management, Qantas said it will go from 11 aircraft type at present to just seven by the end of 2016. The retirement of older Boeing 747s and 767s will be accelerated, while deliveries of Qantas’ A380s and Jetstar’s 787 Dreamliners will be deferred.

Route restructuring will include the suspension of Perth-Singapore and the re-timing of Melbourne-London flights, to allow the A380 used on route to be deployed elsewhere.

But the most eye-catching of the cost-cutting measures is the reduction of 5,000 full-time positions. Of these, 1,500 will come about through the reduction of management and non-operational roles, while others include the closure of a maintenance base at Melbourne and catering facility in Adelaide, plus a reduction of operational roles brought about by the network changes.

The pay freeze for Qantas executives implemented in December 2013 will be extended to all staff.

“I regret the need for these wide-ranging job losses, but we will do everything we can to make the process easier for employees who leave the business,” 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.”

Qantas revenues declined 4% in the six months ending 31 December 2013, to AU$7.90bn, while expenses rose 2% to US$ US$8.06bn.