Wednesday May 22, 2019

AV8 News Aviation News & Analysis


Qantas to shed 5,000 jobs and 50 aircraft in new survival plan

Australian airline Qantas has announced a major cost reduction program that will see AUD $2Bn of costs removed, and 5,000 employees leave the business.

Key points:

  • $2 billion cost reduction, including 5,000 jobs
  • More than 50 aircraft to be deferred or sold
  • $1 billion capital expenditure reduction
  • Core investment in customer service to continue

The cost reduction program has been launched alongside an underlying pre-tax loss of AUD $252m, for six months to the end of December, with revenue down 4% and fuel costs up 3%.

The airline, which plans to reduce its fleet by more than 50 aircraft, said it was facing tough competition in both international and domestic markets.

Qantas chief executive Alan Joyce said he would be discussing the job cuts with trade unions on Friday.

In addition to the redundancies, the airline will also be making changes to its fleet.

In a blow to Airbus, Mr Joyce said Qantas would defer eight remaining Airbus A380 aircraft on order.

It will also defer the receipt of three Boeing's 787 Dreamliner jets which had been ordered for its budget arm Jetstar.

In a statement, Qantas chief executive Alan Joyce said the airline was facing "some of the toughest conditions... it has ever seen" and that it needed to take actions "unprecedented in scope and depth" to cope with changes in the Australian aviation industry.

Qantas has been trying to convince the Australian government that it deserves financial backing, and that rules limiting foreign ownership of the airline to 49% should be relaxed to encourage overseas investment.

It claims it is at a disadvantage because domestic rival Virgin Australia is largely owned by three government-backed operators - Air New Zealand, Etihad and Singapore Airlines.

"The Australian domestic market has been distorted by current Australian aviation policy," Mr Joyce said.

"Qantas has been undertaking its biggest ever transformation over the past four years, cutting comparable unit costs by 19%, but this is not enough for the circumstances we face now."

The airline's shares sank by as much as 7% at the start of trading in Australia after the earnings announcement was made, and closed down 9% at A$1.16.

The airline warned in December that losses in the first half could reach A$300m, citing "immense challenges" from record fuel costs, a strong Australian dollar and fierce competition.

Not long after that earnings alert, two ratings agencies - Moody's and Standard & Poor's - downgraded the airline's credit rating to below investment grade.

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