15 April 2009

Qantas cuts back as downturn hits

Qantas has announced huge cuts to its business in a further sign of the rapidly deteriorating health of the airline industry.

Following a savage revision of its 2008/09 full year profit before tax outlook from around A$500 million to between A$100 million and A$200 million, Qantas is planning to reduce capacity, ground and then sell 10 aircraft, remove 500 management positions, defer aircraft orders, including four Airbus A380s and 12 737-800s, and talk to Boeing about delaying delivery of the 787-800 Deamliner.

Qantas hopes to reduce capital expenditure by at least A$800 million in 2009-2010.

Qantas chief Alan Joyce said that Qantas’s international services and Qantas Freight were bearing the brunt of the decline in economic conditions.

There was a lesser impact on Qantas domestic services, while Jetstar, the Qantas Frequent Flyer business and QantasLink were continuing to perform well, he added.

"Market conditions have deteriorated, especially in our international business.

"We are experiencing significantly lower demand, particularly in premium classes, and considerable price pressures with extensive sales and discounting by all carriers - in some cases leading to fare reductions of up to 50 per cent," Joyce said.

"We have no choice but to lower our profit forecast and make major changes to ensure Qantas can weather the current commercial environment."

Joyce said Qantas would not be giving up routes to achieve its cost cuts.

"We have faced accelerated declines in passenger demand and revenue while market competition has intensified.

"Some competitors are reducing capacity, but overall market capacity into Australia has continued to grow despite falling demand," he said.

"Qantas revenues have come under severe pressure, so it would be irresponsible to rely solely on stimulating demand through attractive pricing given the potential for unprecedented reductions in yield."

Overall, up to 1,250 equivalent full-time positions will be affected within the Qantas Group, in addition to the management reductions being made.

"We want to avoid redundancies wherever possible, so we will be trying to use a range of workforce initiatives to manage the downturn such as, annual leave, long service leave, attrition, redeployment, leave without pay, promoting part-time work and exploring job-sharing", Joyce said.

By Ian Jarrett