Qantas trims for grim times

This will lead to the grounding of the equivalent of 10 aircraft, which will be put up for sale (with the exact types still to be determined at the time of writing). Qantas will also defer delivery of four Airbus A380s by 10 to 12 months (three A380s are still to be delivered this year) and 12 Boeing 737-800s by an average of 14 months. The airline also said that it is “exploring a number of options with Boeing” to defer or possibly cancel some of the 15 787-8s it has on order (planned for delivery to Jetstar). As a result, capital expenditure during the 2009/2010 financial year will be reduced by at least $800 million (to $1. 3 billion, and down from $1. 8 billion in 2008/09).

Qantas says it plans to cut frequencies on key domestic high frequency routes, but will not pull out completely from any markets. Internationally, the cuts will come on frequencies to London, Los Angeles, Hong Kong and Johannesburg.

The carrier also announced that a further 500 management positions will be terminated, while the equivalent of 1250 full-time positions will also be cut as a result of the downscaling of the airline’s operations.

Actual job losses will be minimised through measures such as leave without pay, job sharing and natural attrition.

In his outlook, Joyce said that he expected current market volatility to continue for some time, leading to the lowering of the airline’s forecast profit before tax for the 2008/09 financial year from earlier guidance of $500 million to between $100-$200 million, subject to no further deteriorations in market conditions or fuel price rises. He said that a number of Qantas’s businesses, including Jetstar, QantasLink and domestic services, were performing well given the circumstances, but the Qantas branded international services were experiencing losses that were eclipsing the other profitable areas of the group. Consequently, Qantas is expected to post a loss for the six months to June 30.

“The structural flexibility of our two brand strategy, Qantas’s diversified portfolio of business, and prudent financial management have cushioned the impact of the recent deterioration in market conditions,” Joyce said. “Taking further action on costs and capacity will ensure we can continue to benefit from those strategies. ” That need was further reinforced by traffic figures for March. The Qantas Group carried fewer passengers during March 2009 compared to the same month last year as the carrier’s premium international services continued to feel the effects of the global economic slowdown.

During the month, Qantas’s international services saw passenger numbers fall by 15. 8 per cent to 585,000 (partially offset by an 8. 7 per cent cut in capacity). Jetstar’s international services fared better, with a 36. 3 per cent increase in passenger numbers.

Qantas’s domestic services also saw a decline in passenger numbers, albeit much milder at 2. 6 per cent. QantasLink’s passenger numbers declined by 1. 2 per cent. Jetstar on the other hand recorded a 1. 8 per cent increase in passenger numbers.

(Virgin Blue Holdings recorded an overall increase in passenger numbers during March of 3. 7 per cent. ) Meanwhile, Joyce has told Bloomberg Television that the airline may look at reducing the number of premium seats in some of its aircraft.

“Ideally, in the current environment, we wouldn’t have as many premium seats as we have,” said Joyce, who added that the carrier is experiencing a 30 per cent fall in bookings for its business and first class cabins on long-haul flights. He also said that the airline would likely make a decision on reconfiguring some of its aircraft following a review of the airline’s fleet which is currently underway.

As with other premium airlines, Qantas is struggling with a flight of corporate clients away from the high yielding premium classes into lower yielding economy fares.

But Joyce says that it is unlikely that more routes will be handed over to Jetstar. “There is a limit to what we can do (with Jetstar taking on Qantas routes) and I think we’re getting to that limit,” Joyce told ABC TV’s Inside Business on April 19. “A lot of the problem markets nowa for Qantas are probably markets that Jetstar’s not the right model for – the Los Angeles market as an example. ”