Qantas cuts jobs, reviews maintenance operations

Not all the news was bad with unit costs excluding fuel down three per cent and yield performance up four per cent.

But Qantas boss Alan Joyce said the airline had to make changes in the face of stiffening competition and a shifting global economy.

“Australia has become a very high-cost economy in which to do business,” he said. “Tough decisions today will ensure we don’t need to make harsher ones later. ” Joyce said the 500 job cuts would come from consolidation of catering and maintenance work with another 1400-plus jobs subject to a two-month review of maintenance operations at Melbourne, Avalon and Brisbane airports. This is likely to mean the closure of one and possibly two of those facilities.

“With aircraft retirement, there is simply not enough heavy maintenance work to justify the three facilities,” he said. “We will not be propping up the past at the expense of the future. ” Joyce said Qantas has no plan to move work offshore but said the carrier needs to streamline engineering operations, which cost it at least 30 per cent more than its competitors.

Qantas employs 5500 people in maintenance, engineering and support with a total cost of about $1. 4 billion a year.

Joyce said the airline would launch a two-month review in consultation with unions on the future of its heavy maintenance footprint.

“Our objective will be to ensure that any decision takes into account the views of all stakeholders,” he said. “But we will be acting in the best interests of the business and our people over the long term. ” Federal Employment Minister Bill Shorten raised concerns about the cuts, saying they could undermine Australia’s long-term engineering base.

“If you cut too much you lose skills that are never coming back and there will be a time when we need skilled engineers,” he told ABC Radio. “It is a matter of taking the long term view not the short term.

We have got skilled engineers in Australia and these skills aren’t coming back once you get rid of them. ” Joyce responded forcefully to long-running speculation that Qantas would move jobs from Australia to cheaper overseas labour markets, a key flashpoint in last year’s industrial battles.

“Let me clarify that there will be no jobs going offshore,” he said. “Not one. The jobs that are going have become structurally redundant. ” Still, he acknowledged that the maintenance review was likely to lead to more cuts and said the airline would seek to minimise layoffs by offering voluntary redundancies and giving employees leave without pay to work in other areas of the industry, including other airlines.

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, while looking to increase partnerships with local food suppliers.

He also announced several other moves meant to save money. These include ending flights between Singapore- Mumbai and Auckland-Los Angeles from May, cutting services between Bangkok/ Hong Kong and London from March, and substituting smaller Airbus A330 aircraft for Boeing 747s on Sydney-Bangkok flights from June. Joyce said the airline would retire a pair of 747s in addition to the four already slated for retirement in April and would save further money thanks to the delay in 787-8 deliveries and reducing non-aircraft capital expenditure.

The first Qantas Group 787, a 787‑8 for Jetstar, is now expected to be delivered in mid 2013.

Qantas’s international operations remain a weakness, Joyce said, particularly as lower cost Asian carriers increasingly target the Australian market.

While outbound international travel remained strong, he said, inbound travel was flat with demand on traditionally lucrative routes from the UK and Europe especially weak.

“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. ” Like other Australian companies that have cut jobs in recent months, Qantas must deal with the effects of a shifting world economy, tight credit markets, sustained weakness in Europe and a high Australian dollar all taking a toll, Joyce said.

“These factors will not go away and are likely to magnify.

At Qantas, we know we must continue to adapt if we are to prosper and enhance long-term shareholder value. ” Still, Joyce also highlighted strengths that he said proved the airline’s resilience despite difficult 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. ”