Crisis to ground Qantas flights as profit in freefall

Crisis to ground Qantas flights as profit in freefall

Ewin Hannan and Matthew Franklin | April 15, 2009
Article from: The Australian ( an Excerpt)

A DRAMATIC collapse in international travel has driven Qantas into the red for only the second time since it was floated 15 years ago, forcing the airline to axe up to 1750 jobs, cut back on flights, ground 10 planes and delay the delivery of its next generation of jets.

With the recession shattering the tourism industry, Qantas pilots and cabin crew will be among the prime targets of the airline's job shedding that will see up to 1250 workers and 500 managers cut from its 34,000-strong workforce.

Australian domestic routes will be the worst hit, along with routes to the US, Britain and South Africa. The airline, which will defer delivery of four Airbus superjumbo A380s, will also reduce freight capacity on domestic and international routes.

Declaring the cuts necessary to help Qantas weather the aviation industry slump, chief executive Alan Joyce yesterday revised the airline's 2008-09 pre-tax profit forecast down from $500million to between $100 million and $200 million.

Mr Joyce said Qantas would seek to "protect as many jobs as possible" through attrition, redeployment, leave without pay, annual and long service leave, promoting part-time work and exploring job-sharing.

The move has heightened fears about the extent of the collapse in the tourism industry - which has already suffered a 3 per cent slide in international visitor arrivals in the first two months of the year.

Travellers from the US, Britain, Japan and China are down sharply, and the tourism industry believes forecasts of a 4.1 per cent drop for the year could be optimistic.

Julia Gillard described the Qantas decision as "unwelcome news", coming just weeks after Pacific Brands axed 1850 jobs.

While the Deputy Prime Minister vowed Canberra would stand "shoulder to shoulder" with Qantas workers, the Rudd Government's plans to reduce spending on travel by public servants will contribute to the airline's revenue downturn.

Finance Minister Lindsay Tanner announced earlier this year he would spend $13.8 million establishing video-conferencing facilities in Canberra and other capital cities to save public money.

The savings push, part of a continuing effort by Mr Tanner to ease pressure on the public purse across a range of spending areas, will perversely run counter to the Government's promises to do everything within its power to prevent job losses caused by the global recession.

But government sources stressed last night that the Government would meet its promises on reducing travel costs, with the video-conferencing funding delivered as part of its Mid-Year Economic and Fiscal Outlook document.

Taxpayers spend about $15 million a year on airfares for public servants and politicians.

Unions warned that maintenance standards could be undermined by the cuts, and engineers raised the prospect of legal action if Qantas sought compulsory redundancies.

ACTU secretary Jeff Lawrence said he would seek urgent talks with Qantas management this week to find alternatives to the "harsh" cuts. He ruled out unions offering a pay freeze as a possible means of minimising the job losses.

Malcolm Turnbull cited the job cuts as a reason for the Government to give small businesses tax breaks so they could employ the sacked workers.

As the global recession continued to lengthen dole queues yesterday, the Opposition Leader demanded Kevin Rudd stop behaving like a "drunken sailor" handing out economic stimulus payments and instead focus on small business.

Mr Joyce said the international market had turned sour for Qantas. "We are experiencing significantly lower demand, particularly in premium classes, and considerable price pressures with extensive sales and discounting by all carriers." Mr Joyce said, in some cases, airlines had cut fares by up to 50 per cent.

"We have no choice but to lower our profit forecast and make major changes to ensure Qantas can weather the current commercial environment," he said. "Qantas revenues have come under severe pressure, so it would be irresponsible to rely solely on stimulating demand through attractive pricing, given the potential for unprecedented reductions in yield."

In addition to a further 5 per cent cut in flying capacity on domestic and international routes, Qantas's capital spending will be slashed by $1 billion by June next year; 10 aircraft will be grounded and made available for sale; and orders for four super-jumbo Airbus A380s and 12 Boeing 737-800 aircraft will be deferred.

Qantas is also negotiating with Boeing about reducing its scheduled purchase of 15 787-800 aircraft, the so-called Dreamliner.

The Transport Workers Union said it would seek to minimise job losses by transfering positions throughout the Qantas group of companies.