Qantas cuts 5,000 jobs, ends Perth-Singapore route

Struggling Australian carrier Qantas on Thursday said it will take measures including cutting 5,000 jobs and ending its Perth-Singapore route in a major shake-up after a first-half net loss of A$235 million (S$267 million), warning of more pain ahead
Struggling Australian carrier Qantas on Thursday said it will take measures including cutting 5,000 jobs and ending its Perth-Singapore route in a major shake-up after a first-half net loss of A$235 million (S$267 million), warning of more pain ahead. -- FILE PHOTO: REUTERS

SYDNEY (AFP) - Struggling Australian carrier Qantas on Thursday said it will take measures including cutting 5,000 jobs and ending its Perth-Singapore route in a major shake-up after a first-half net loss of A$235 million (S$267 million), warning of more pain ahead.

The airline, battling record fuel costs and fierce competition from subsidised rivals, is working to slash costs by A$2 billion over three years as it faces some of its toughest ever conditions.

The carrier's underlying loss before tax in the six months to December 31 - the airline's preferred measure of financial performance - came in at A$252 million, a figure chief executive Alan Joyce called "unacceptable and unsustainable".

"Hard decisions will be necessary to overcome the challenges we face and build a stronger business," said Mr Joyce, who will take a 36 per cent wage cut.

Part of the restructure will see 5,000 full-time positions lost from the carrier's 32,000-strong workforce by 2017, with 1,500 from management or non-operational roles. A wage freeze will be applied across the network until the airline returns to profit.

"I regret the need for these wide-ranging job losses, but we will do everything we can to make the process easier for employees who leave the business," he said.

"At the end of this transformation, Qantas will remain an employer of more than 27,000 people, the vast majority based in Australia - and we will be a better and more competitive company."

The carrier also flagged "significant changes" to its fleet plans and network and a reduction in capital expenditure of A$1 billion across the next two financial years. This will see the selling or deferred delivery of 50 aircraft, including the early retirement of some of its Boeing 767-300s and six oldest Boeing 747-400s. Delivery of the eight remaining A380s it has on order will be put off to an unspecified date.

Qantas said it will also axe its Perth to Singapore route and suspend new growth plans for its budget offshoot Jetstar in Asia.

"When it comes to Jetstar in Asia, we need to take the right decisions in accord with current market circumstances and our balance sheet," said Joyce.

"In Singapore, growth has been suspended by the Jetstar Asia board until such time as conditions improve."

Following an interim profit warning in December, Moody's and S&P both downgraded Qantas' credit rating to "junk" status, increasing the cost of financing for the carrier and restricting access for investors who do not put their money in lower-rated companies.

Qantas has since been working to convince the government it deserves a debt guarantee while lobbying Canberra for a relaxation of the Qantas Sale Act, which limits foreign ownership in the airline to 49 per cent.

Mr Joyce argues that the cap is hurting Qantas' ability to compete by restricting access to capital, particularly against domestic rival Virgin Australia, which is majority-owned by state-backed Singapore Airlines, Air New Zealand and Etihad.

Australia's conservative government said this week it was drafting laws to allow Qantas to be majority foreign-controlled while allowing a single foreign shareholder to own more than 25 per cent.

But it faces problems passing through the upper house Senate with Labor and the Greens vowing to block legislation that allows majority overseas ownership while remaining open to an assistance package.

Mr Joyce said the action Qantas was taking was "unprecedented in scope and depth" and warned of more difficult decisions ahead.

"To reach A$2 billion in cost cuts over three years, we have to work our assets harder, become more productive, retire older aircraft, and make sure that our fleet and network are the right size," he said.

"We must defer growth and cut back where we can, so that we can invest where we need to. We have already made tough decisions and nobody should doubt that there are more ahead."

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