Qantas to slash jobs, cut costs as first-half profit slumps

SYDNEY (AFP) ― Embattled Australian carrier Qantas said Thursday it will slash at least 500 jobs, cut costs and close two routes after posting an 83 percent slump in first half net profits.

The airline’s result in the six months to December came in at Aus$42 million ($44.8 million), compared to Aus$241 million in the previous corresponding period, due to high fuel costs and the grounding of its fleet in October.

Chief executive Alan Joyce pulled all the airline’s planes out of the skies for 48 hours as part of a row with staff over plans to shift the focus of its ailing international arm to Asia.

It cost the carrier dearly, but Joyce said it was the only option.

“The damaging industrial action we faced last year is over, and industrial action on that scale is unlikely for the foreseeable future,” he said.

“Our decision to ground the fleet was made necessary because our customers were being massively disrupted by the unions and the ongoing campaigns by unions were damaging our brand.”

The dispute was ultimately terminated by an order of the country’s industrial relations umpire but it cost Qantas Aus$194 million in lost revenues and forward bookings.

Jet fuel costs in the first-half were also up by Aus$444 million.

In a bid to recoup the losses, Joyce said the airline’s projected capital expenditure for full-year 2012 would be cut by Aus$200 million to Aus$2.3 billion and by a further Aus$500 million in 2012/13.

Savings will come from the deferral of new Boeing 787-800s due to manufacturer delays and a reduction in planned domestic growth.

This will see jobs cut as it makes changes to its engineering and catering services due to aircraft retirements and operational changes.

“We anticipate there will be 500 positions affected by the immediate changes that we have announced today,” Joyce said, but made clear no jobs would be going offshore, a key gripe of unions.

However, he foreshadowed further job losses following reviews of its catering and heavy maintenance operations.

“We can’t at this stage pre-empt the reviews that are going to take place but, as I said... we expect there to be further jobs affected by those reviews,” said Joyce.

“It would be premature for me to actually say what we believe the total number will be.”

He said the airline hoped to minimize compulsory redundancies and would focus instead on voluntary redundancies, using annual and long service leave and seconding staff to other airlines.

The government acknowleged that Qantas faced challenges competing with airlines overseas that have a lower cost base but warned vital skills could be lost forever if maintenance jobs went.

“By the same token you can cut too much and then lose skills that are never coming back,” Employment Minister Bill Shorten said.

“And there will be a time when we need skilled engineers.”

The airline will also axe unprofitable services from Singapore-Mumbai and Auckland-Los Angeles in May with Joyce saying the airline must “confront the new global realities” and adapt.

“Looking forward, while the global economic situation remains volatile, we remain cautiously optimistic about the demand environment, both domestically and in the Asia-Pacific region,” he said.

“The results I have announced today show the resilience of the Qantas Group and our readiness for the future.

“Overall our business is strong, we are exerting financial discipline, and we are well placed to handle this complex economic and competitive environment.”