• Home
• /
• Markets

Qantas to cut 5,000 jobs, posts $211 million loss

Qantas Airways said it will cut 5,000 jobs and posted a first-half loss of A$235 million amid tougher competition, sending its shares down more than seven per cent.

The loss for the six months through December 2013 followed an A$111 million ($114 million) profit for the same period a year earlier. The loss excluding one-time factors was A$252 million. The airline has struggled on international routes and its dominance on Australian domestic routes has been eroded.

The Australian flag carrier said the 5,000 jobs would be cut as part of plans to reduce costs by A$2 billion over three years. The job cuts amount to just under one sixth of Qantas’ workforce of 32,000.

Qantas Airways chief executive Alan Joyce said the Qantas fleet would be reduced from 11 to seven aircraft types, and wages would be frozen until the airline made a profit. He would discuss the job cuts with unions on Friday.

Australia had been “hit by a giant wave of international airline capacity,” with a 46 per cent increase in passenger seats since 2009, more than double the global increase of 21 per cent in the same period, he said.

“We are facing the toughest conditions Qantas has ever seen,” Joyce said. “This performance by our airlines is unacceptable and the current position is unsustainable,” he said, referring to Qantas and its Jetstar Group subsidiary.

The Australian government is considering reducing foreign ownership restrictions legislated in 1992 before the state-owned airline was privatised, which would allow the airline to receive a cash infusion by bringing in a new investor or investors. The government has also discussed with Qantas providing a standby debt facility backed by a government guarantee, for which Qantas would pay a fee.

Qantas argues that the 49 per cent cap on foreign ownership, 35 per cent limit on ownership by foreign airlines and 25 per cent cap on ownership by any single foreign investor put it at a disadvantage against state-owned competitors in raising capital.

Prime Minister Tony Abbott said the government was determined to create a level playing field for the airlines.

“We want to ensure that Qantas is not competing against its rivals with a ball and chain around its leg,” Abbott told Parliament.

State-owned Air New Zealand, which has 24.5 per cent stake in Qantas’ major rival Virgin Australia, posted a record half-year profit of 140 million New Zealand dollars ($116 million) on Thursday.

That result was a 40 per cent improvement on the same period a year earlier, and came despite a 1.6 per cent fall in revenue to NZ$2.3 billion.

Joyce put much of the blame for the poor Qantas result on an “uneven playing field” with Virgin Australia, which is 64 per cent owned by three state-owned carriers Air New Zealand, Etihad Airways and Singapore Airlines. “The Australian domestic market has been distorted by current Australian aviation policy,” he said.

“Late last year, these three foreign airline shareholders invested more than A$300 million in Virgin Australia. That capital injection has supported continued domestic capacity growth by Virgin Australia despite its growing losses,” he said.