(Reuters) — Australian carrier Qantas Airways Ltd plans to cut 15 percent of its workforce, sell older jets and reduce capital spending after reporting a first-half loss amid growing competition in both international and domestic operations.
The deep cuts are part of Qantas’ plans to slash costs by A$2 billion ($1.8 billion) over the next three years – a bid by the airline to convince the federal government and investors it is worthy of the state assistance it says it needs.
“Today I regret to announce that we will be reducing our employee numbers by the equivalent of 5,000 full-time staff over the next three years. This number includes the one thousand we announced last December. This will be managed through reductions right across the group, including a reduction of management and non-operational roles by 1,500. Operational decisions that were affected by the fleet and network changes. A restructuring of line maintenance operations, a restructuring of catering facilities including the closure of the Adelaide catering facility as we have previously announced,” said Chief Executive Alan Joyce on Thursday (February 27).
The cuts also include the closure of Avalon heavy maintenance base which will close at the end of March.
Qantas, known as the ‘Flying Kangaroo’, is seeking a government debt guarantee to give it access to cheaper capital.
Battered by high fuel costs and a strong Australian dollar, its credit rating was relegated to junk status last year amid a price war with arch-rival Virgin Australia.
Shares in Qantas, down a quarter over the past year, fell 7 percent after the Sydney stock market opened.
The underlying loss before tax of A$252 million ($226 million) was in line with the A$250 million to A$300 million loss the airline warned last month it would report for the six months ended Dec. 31. In the same period a year earlier, Qantas made a profit of A$220 million profit.
“We will cut where we can in order to invest where we must. We’ll be a far leaner Qantas Group and it should be clearly understood that we are taking these actions, we must take these actions irrespective of any decision which the government may or may or may not take in relation to leveling the playing field,” said Joyce.
Qantas claims Virgin’s access to foreign funding, via its major shareholders Gulf carrier Etihad, Singapore Airlines and Air New Zealand, has put Virgin at an advantage.
Of the 5,000 jobs to go, 1,500 were management and non-operational roles, the airline said.
Joyce said Qantas would defer receipt of the final three Boeing 787 Dreamliner jets it ordered for budget arm Jetstar, as well as the eight remaining Airbus A380s it has on order. The moves are part of a plan to either defer or sell a total of 50 aircraft.
The airline also said it has agreed to sell a lease it owns at Brisbane airport, raising A$112 million in cash.
Prime Minister Tony Abbott said earlier this week it was in Australia’s interests for Qantas to “survive and to flourish” as a major employer for the country.
“It’s a great Australian airline, it’s a great Australia icon, we want it to flourish. For that to happen two things are necessary. First, it needs to be able to compete on level playing field with it’s rivals and second it does need to put it’s own house in order. Now Qantas is doing it’s best to put it’s own house in order and this government will do what it can to ensure that it has a level playing field on which to compete,” Abbott said in parliament on Tuesday (February 25).
The government is drafting changes to the Qantas Sale Act to lift the current 49 percent foreign ownership limit as well as alter restrictions on smaller shareholdings for foreign airlines.
