Qantas preparing to make 'tough decisions'
There are fears up to 5000 jobs could go as the cash strapped airline tries to prove it is serious about saving $2 billion over the next three years.PT1M46S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-33ggn 620 349 February 26, 2014
Qantas employees are in line for a round of brutal cuts as chief executive Alan Joyce looks to return the airline to sustainable profitability.
The most obvious way to save $2 billion of costs over the next three years is to cut jobs. The airline has already said more than 1000 will go, but the actual figure could reach 5000 or even more.
Analysis from broker BBY shows Qantas has an average staff cost of $110,000 per person across its business, which means every 1000 jobs cut could save $110 million a year. Therefore on a simplistic calculation, cutting 5000 jobs would save $550 million a year, or $1.65 billion over three years.
Qantas' Alan Joyce is unlikely to give ground to competitors in Singapore and New Zealand. Photo: Nic Walker
That will lead to large redundancy payouts, which can be covered by the sale of leases over capital city airport terminals. These could fetch up to $1 billion. Areas that could be targeted include the head office, engineering, call centres and ground handling, but the prospect of pilot and flight attendant redundancies also can't be ruled out.
Aircraft Engineers Association’s Steve Purvinas told radio 3AW that engineers would wait to see what Qantas had to say tomorrow before deciding on taking any action.
“We’ve written to Qantas yesterday and said we had some concerns about occupational health and safety,” he said.
“Subject to the outcome of the announcement and what they’ve done in the way of risk assessment we may need to meet with our members on the day.”
Other cost-cutting moves are likely to include the early retirement of the airline's ageing 767s and its oldest 747s which will help lower fuel, maintenance and other staffing costs. Underperforming international routes will be culled, but Qantas has already revealed London will be safe on that front.
Qantas could decide to shift more of its domestic flying to lower-cost arm Jetstar, but the prospect of major service cuts is unlikely due to the airline's insistence on maintaining a 65 per cent share of the domestic market to maximise profitability over time.
The market share strategy, which has begun to come under question from some shareholders because it is the root of the current domestic losses, is expected to be reaffirmed on Thursday.
The question is how long Qantas and Virgin will allow the bloodbath to continue in the domestic market. Qantas has suggested Virgin's $350 million capital raising in December has given the upstart enough cash to keep challenging on the domestic front for another year or so before needing to go back to Air New Zealand, Singapore Airlines and Etihad Airways for a top up.
Virgin may give more of an indication of its plans alongside its half-year results on Friday but to date, for competitive reasons, it has kept its cards close to its chest.
Joyce is likely to continue to defend the airline's investments in Jetstar's Asian and New Zealand arms on Thursday, despite criticism from some quarters that the cash and management time is better spent closer to home.
Joyce is said to have privately argued that shutting down the Singapore and New Zealand based arms would be a free kick to rivals Singapore Airlines and Air NZ.
But it could also be argued that Jetstar's decision to set up shop in those markets riled up those government-backed carriers enough to invest in Virgin in the first place.
-with Patrick Hatch