Fuel pricing pressure continues to hurt Qantas
Qantas has stated that it will need to ramp up it’s cost saving endeavours to cope with the increasing pressure from escalating world oil proces.
While initially targeting $3 billion in savings by 2008, analysts now estimate the carrier will need to shave at least another $250 million from the bottom line.
Chief financial officer Peter Gregg admitted the “Sustainable Future” program target was inadequate and refused to rule out fare rises in addition to recently announced fuel surcharge increases of up to $23 per sector that take effect from Friday.
Mr Gregg said labour and fuel now accounted for 60 per cent of Qantas’s expenses and the higher fuel bill meant responses other than cost-cutting were limited. “We’re in new territory now,” he said.
“Inflation’s moved a little bit. Clearly, at these fuel prices – fuel is $1 billion higher in 2007 than it was in 2006 – you have to make changes.
“The targets we set ourselves for Sustainable Future won’t be large enough.”
Mr Gregg said that the new round of cost cuts should not be seen as an attack on workers.
“This is an attack on a cost base that makes the business inefficient, and we have to make it efficient if we are to survive,” he said. “And the great bulk of Qantas workers have got jobs because (we) have pursued an efficiency drive over a period time.”
He said there was a combination of events – potentially rising interest rates, increasing fuel prices and higher living costs – that had to be watched closely.
Qantas could reduce capacity if demand fell but that “would be pretty extreme at this stage”.
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