Australia : Qantas cuts 5000 jobs, posts $252 million first half loss
Qantas cuts 5000 jobs, posts $252 million first half loss
Matt O'Sullivan
with James Massola and Jens Meyer
February 27, 2014
Qantas will axe 5000 jobs, ditch unprofitable routes and retire ageing gas-guzzling planes in the biggest shake up of its operations since it was floated almost two decades ago.
It is the biggest cull of Qantas' staff since chief executive Alan Joyce took the reins in 2008, and will reduce the airline's workforce to about 27,000 over the next three years.
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Qantas chief executive officer Alan Joyce described the cuts as "tough decisions" during a press conference this morning.
Photo: Tamara Dean
Before the latest retrenchments, Mr Joyce had announced almost 4200 job cuts during his tenure.
The airline also reported a $252 million underlying loss in the first half amid a bitter fight with Virgin Australia in the domestic market, and intense competition on international routes. It is Qantas' biggest first-half loss since the Keating government began cutting it free from government ownership in 1995.
The job cuts from Qantas's 33,000-strong workforce will be across the board. They include reducing management and back office staffing levels by about 1500. It will also wind back its aircraft maintenance operations and catering.
Qantas will also ditch flying between Perth and Singapore later this year and retire six Boeing 747 jumbos. It has also deferred the delivery of the last eight A380 super jumbos it has on order, as well as the last three of 14 new 787 Dreamliners due for Jetstar.
It will also shelve growth plans for Singaporean budget offshoot Jetstar Asia amid intense competition with other budget airlines in the region.
Qantas shares fell sharply Thursday following the announcement.
Mr Joyce said the airline ''must take actions that are unprecedented in scope and depth to strengthen the core'' of the business.
''We have already made tough decisions and nobody should doubt that there are more ahead,'' he said.
''To reach $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. We must defer growth and cut back where we can, so that we can invest where we need to".
The first question thrown at Mr Joyce during a press conference this morning was focused on his grip as CEO. Mr Joyce declared he was "absolutely committed" to Qantas.
"Obviously the circumstances that Qantas faces today are very difficult. We have the capacity situation both domestically and internationally. But we have a plan to fix the problem."
Unions savage cuts, pledge fight
The Australian Services Union says Qantas decision to shed 5000 full time workers is short sighted.
The ASU represents workers in airport check-in, head office, administration and finance, call centres, freight and engineering clerical workers and administrative, operations and technical staff.
ASU Assistant National Secretary Linda White says the decision is devastating for all workers at the company.
"It's outrageous that so many Qantas (and Jetstar) staff are going to bear the brunt of the poor business decisions made by Qantas in recent times," Ms White said.
"Qantas have suggested they will seek to freeze wages until they achieve a full year underlying profit. This is an indefinite claim, and front line staff will have no influence over this outcome. It's punishing the workers for the poor business decisions made by Alan Joyce".
Unions had been bracing for massive cuts at the airline for weeks, which they have been expecting to include engineers and pilots among the redundancies.
Qantas has for years steered clear of making redundant its large workforce of pilots – including about 2600 who fly long-haul aircraft – preferring to allow them to take unpaid leave or seek time out to work for other airlines.
The influential pilots' union has described the Qantas announcement as a "demolition job" which had failed to "follow through with a strategy for how it will grow the business".
Australian and International Pilots Association president Nathan Safe said the Abbott government should be "twisting management's arm to be open and honest about where" the airline was heading.
"Otherwise, it is like supporting a plan to bulldoze half a house before the blueprints to rebuild have been drawn," he said.
Political blame game fires up
Transport Minister Warren Truss has singled Qantas' high costs and wages as a key factor weighing the airline down and says the government will monitor markets' reaction to the airline's reported $252 million underlying loss before moving to respond.
In an exclusive interview with Fairfax Media, Mr Truss said the Coalition was "not in the business of propping up businesses" but acknowledged the key strategic role Qantas plays in servicing cities across Australia.
"The Qantas wage and cost structure places them at a significant disadvantage to the people they are flying alongside. Many of them are Asian carriers these days, they are Middle Eastern carriers where the wage structures are very much lower,'' he said.
"Everyone has noticed the rise of Emirates and Etihad but we have to start watching the rise of China Southern and the major Chinese airlines. In my view, these major airlines in China will be dominating world aviation alongside Emirates and Etihad within literally three or four years. "Their cost structure is very, very much lower then Qantas' could ever be, so they will face continuing challenges in the international routes."
Mr Truss dismissed calls by independent MP Nick Xenophon for an inquiry into the airline. Senator Xenophon said Qantas and its derivative business Jetstar had been badly run.
Opposition Leader Bill Shorten said Qantas' decision was the worst day for aviation in Australia since the collapse of Ansett and accused the government of inaction as the airline had signalled a need for support back in December.
Mr Shorten said Labor would continue to support the airline being majority Australian-owned, as well keeping its head office and board Australian-based.
He said it was time the federal government made clear whether it would offer a debt guarantee to the airline, rather than playing games and focusing on changes to the Sale Act.
Greens deputy leader Adam Bandt said that the government should seek guarantees from Qantas management that jobs would not be sent offshore before moving to offer support to the airline.
Profit, revenue falls
Qantas declared a statutory loss of $235 million for the six months to December, compared with a $109 million profit in the same period a year earlier. Revenue fell 4 per cent to $7.9 billion.
Qantas' domestic operations reported a 74 per cent fall in pre-tax profit to $57 million, which was blamed on intense competition in the domestic market and growth in capacity.
But it was overshadowed again by Qantas' international operations, which slumped to a $262 million loss compared with a $91 million loss previously.
Qantas said its alliance with Emirates ''partially offset'' the impact of capacity on routes in and out of Australia increasing by 9 per cent.
Jetstar also slumped to a $16 million loss from a $128 million profit previously, reflecting ''the impact of domestic competitive pressures'' as well as $29 million in start-up losses from its associate airlines in Asia. They include Jetstar branded airlines in Japan, Vietnam and Singapore. The airline has not given any earnings guidance for this financial year, nor has it paid a dividend.
Qantas has also confirmed it has reached agreement to sell its long-term lease on its terminal at Brisbane Airport for $112 million. The lease was due to expire in 2018.
Under the arrangements with the airport, Qantas will retain exclusive use and operational control over much of the northern end of the terminal until the end of 2018 while ''securing rights to key infrastructure beyond this period''.
smh.com.au
