Qantas’ Joyce Says More Cost Cuts Under Consideration

A Bloomberg report sasy that Qantas will try to cut costs by scrutinizing aircraft weight and navigation to save fuel without compromising service, incoming Chief Executive Officer Alan Joyce said.

“One of the great things about the Qantas brand is that it commands a premium because of the product,” Joyce, 42, said in an interview.

“We want to improve that yield premium because that’s absolutely critical to us.”

Qantas, like other airlines around the world, needs to reduce expenses in the face of record jet fuel prices.

U.S. Airways Group Inc. has eliminated snacks. Delta Air Lines Inc. is charging $25 for telephone reservations; AMR Corp.’s American Airlines has begun charging for one checked bag.

The carrier will probably cut costs by changing operations in a way that customers aren’t likely to notice overtly, said Joyce, whose appointment as chief executive officer was announced this week by Sydney-based Qantas. Joyce, who comes from Qantas discount carrier Jetstar, will replace Geoff Dixon in November when the currency CEO retires.

“Fuel costs are a significant variable and with the gyrations in price, obviously it makes planning a lot more difficult,” Joyce said.

“One of my big drivers will be to keep the flexibility, the adaptability, so that we can cope with significant change.”

Qantas has already cut routes, raised ticket prices, eliminated workers and decided to freeze executive pay.

The airline’s shares fell 1.5 percent at the 4:10 p.m. close of trading in Sydney. They’ve declined 39 percent since the beginning of the year compared with a 27 percent drop for Cathay Pacific Airways Ltd.

Fuel costs at airlines have almost tripled since 2000, now accounting for as much as 40 percent of operating expenses at some carriers, according to the Airport Transport Association, a Washington, D.C.-based trade group.

A A$1 increase in fuel prices can add as much as $A37 million ($35 million) to $A38 million to the Qantas group’s costs, according to Joyce.

The price of jet-fuel has risen 76 percent in the past year and stood at $153.05 a barrel yesterday in Singapore, according to Bloomberg data. It touched a record $181.85 on July 3.

On the operational side, Qantas is likely to examine the amount of water in portable tanks and the configuration of its aircraft to try and remove excess weight.  The biggest savings may be found in how the planes are navigated, Joyce said.

The carrier has begun testing a global positioning system- type navigation style.

“We’ve been doing trials at a number of airports and that saves significant amounts of fuel costs because it’s the flight path into the airport that you’re talking about,” he said.

Safety will remain the highest priority for the carrier, Joyce said in a television interview.

Joyce is taking over an airline facing a spate of incidents that threatens to undermine its reputation as one of the world’s safest carriers.

Qantas, which has never had a fatal accident on any of its jets, last week diverted a Boeing 747 carrying 365 passengers and crew to Manila after a fuselage section came off.

No injuries were reported on the aircraft, which was on the Hong Kong-to- Melbourne leg of a flight that originated in London.

The crew, flying at 29,000 feet, made an emergency descent before diverting to Manila, the Australian Transport Safety Bureau said in a statement.

Air safety officials investigating the emergency landing have said some oxygen masks didn’t deploy after an explosion punctured the jet’s body.

Qantas said on July 27 that it would inspect all oxygen bottles on its Boeing Co. 747-400 aircraft.

The Australian Transport Safety Bureau is probing why a “small number” of masks failed to drop down, spokesman Julian Walsh told reporters yesterday.

A Report by The Mole from Bloomberg