Qantas to cut capacity, routes, aircraft and management staff

written by australianaviation.com.au | March 30, 2011
Qantas is retiring two 767s. (Rob Finlayson)

Qantas has announced plans to cut domestic and international capacity growth, suspensions and cuts to some Japan and NZ services, the early retirement of two 767s, and plans to reduce management staff numbers in response to high jet fuel prices and the recent natural disasters in Japan, New Zealand and Queensland.

“We need to act decisively to respond to rising fuel costs and natural disasters, just like we did during the global financial crisis, to ensure the ongoing sustainability of our business,” Qantas CEO Alan Joyce said in announcing the changes.

Joyce said the fuel price increases represent “the most serious challenge Qantas has faced since the global financial crisis,” while,  “There has never been a time when the world faced so many natural disasters, all of which have come at a significant financial cost to the Qantas Group.”

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Qantas’s response to the natural disasters and rising fuel prices will see it:

– Cut Qantas Group capacity growth for the second half of the current financial year from 14 per cent to eight per cent for domestic operations, and from 10 per cent to seven per cent for international operations;

– Suspend “up to” four Jetstar return weekly services between and Australia and Japan from April 1 to the end of August, suspend Qantas Perth-Toyko flights from May 8, and swap smaller Airbus A330s in place of Boeing 747-400s on the Sydney-Toyko route;

– From April cut three NZ domestic Jetstar services to Christchurch and one Melbourne-Christchurch trans Tasman service;

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– Bring forward the retirement of two Boeing 767-300ERs;

– And look to reduce management staff numbers, and reduce annual and long service leave liabilities.

“We want to limit redundancies wherever possible and will be using a range of initiatives to manage the reduction in capacity including annual and long service leave,” Joyce said. “At this stage only management positions will be made redundant.”

Joyce said it is too early to estimate the full impact of the natural disasters and fuel prices on the Qantas Group’s full year profit, but the airline puts the cost of the natural disasters to its bottom line at approximately $140 million (with the Queensland floods costing $60 million, Cyclones Yasi and Carlos $20 million, the Christchurch earthquake $15 million, and the Japan earthquake and tsunami at $45 million). The airline also expects the continuing impact of last year’s QF32 incident and subsequent A380 grounding to cost $25 million in the second half.

The announcements came on the same day that Qantas reported its February traffic figures, which show that passenger numbers across the group were up 5.1 per cent over the same month in 2010. RPKs were also up by 5.1 per cent, while capacity in ASKs was up 7.2 per cent, leading to 1.6 per centage point fall in load factor to 77.9 per cent.

By sector for the month, Qantas domestic traffic actually fell, by 0.8 per cent, while Jetstar domestic traffic grew 15.2 per cent, Jetstar international traffic by 5.2 per cent, Qantas international traffic was up by 0.9 per cent, and QantasLink traffic up 8.7 per cent.

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