Qantas will slash 500 jobs and launch a review of maintenance operations likely to lead to more cuts and the shutting of maintenance facilities after announcing an 83 per cent drop in half yearly profits today.
The airline said its underlying pre-tax profits for the six months ending December 31 fell to $202 million, down $215 million from the prior year. It attributed the drop to higher fuel prices and the cost of last year’s industrial action, which the airline has put at $194 million. Statutory profit before tax for the half was just $48 million, even though revenue increased 6 per cent (to $8 billion).
Qantas CEO Alan Joyce said the airline remained strong but had no choice but to make changes in the face of an increasingly challenging business environment.
“Tough decisions today will ensure we don’t need to make harsher ones later,” he said.
Joyce said the 500 job cuts would come from consolidation of catering and maintenance operations, with another 1400-plus jobs subject to a two month review of maintenance operations at Melbourne, Avalon and Brisbane airports.
“With aircraft retirement, there is simply not enough heavy maintenance work to justify the three facilities,” he said, adding that the airline had no plan to move operations offshore but needed to consolidate work in Australia, which he said cost Qantas at least 30 per cent more than its competition.
“We will not be propping up the past at the expense of the future,” he said, noting that the current three maintenance facilities could be consolidated into as few as one.
Joyce said catering operations would be shut down in Adelaide from 2013 and the airline would look at selling one of its two catering centres in Sydney as well as its Cairns facility.
He also announced several other moves meant to save money. Those include ending flights between Singapore-Mumbai and Auckland-Los Angeles from May and substituting smaller Airbus A330 aircraft for Boeing 747s on Sydney-Bangkok flights from June. Joyce said the airline would also save money by delayed 787-8 deliveries and reducing non-aircraft capital expenditure.
Qantas’s international operations remain a weakness, Joyce said, particularly as lower cost Asian carrier increasingly target the Australian market.
“The reality is that even the strengths of the rest of our business will not be able to compensate for this issue over the long term,” he said.
Joyce also highlighted strengths that he said proved the airline’s resilience despite difficult economic times, including double digit revenue growth from corporate travel and record frequent flyer results. And he once again defended his controversial decision to ground the Qantas fleet in October amid industrial action by unions.
“It was impossible to deliver our schedule and the business community was starting to leave Qantas,” he said. “If we had done nothing our brand would have been in trouble.”