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Qantas to cut 1,000 jobs, says challenges "immense"

05 december 2013, 15:21
0
Qantas Group chief executive officer Alan Joyce. ©AFP
Qantas Group chief executive officer Alan Joyce. ©AFP
Australian carrier Qantas announced the axing of 1,000 jobs and warned of "immense" challenges ahead in a shock profit downgrade Thursday, flagging a half-year loss of up to Aus$300 million (US$271 million), AFP reports.

Chief executive Alan Joyce said conditions had seen a "marked" deterioration and the airline was battling "extraordinary circumstances" including record fuel costs, a strong Australian dollar and fierce competition from subsidised rivals.

Qantas shares plummeted up to 17 percent to 99.5 cents on the news, which comes just months after the carrier returned to a modest Aus$5 million annual profit in August following a strategic tie-up with Emirates.

"The challenges we now face are immense," Joyce said in an update to the Australian stock exchange.

"Since the global financial crisis, Qantas has confronted a fiercely difficult operating environment -- including the strong Australian dollar and record jet fuel costs, which have exacerbated Qantas' high cost base," he added.

"The Australian international market is the toughest anywhere in the world."

Qantas was optimistic it had turned a corner after inking a major partnership with Dubai-based Emirates and reversing its 2012 annual loss -- the first since privatisation -- but Thursday's numbers show it is still facing significant headwinds.

Joyce said Qantas expected to report a loss before tax in the six months to December 31 of Aus$250-300 million, with passenger loads slipping significantly in November as increased competition drove down the Australian carrier's market share.

Fuel costs for the half-year were Aus$2.27 billion -- Aus$88 million higher than in the second half of 2012.

"Urgent" action was needed to salvage the Flying Kangaroo's profitability, Joyce said, including the sacking of "at least 1,000" staff, a cut to his own pay and that of the Qantas board, a review of spending with top suppliers and a salary and bonus freeze.

"We have reduced the group's unit costs, excluding fuel, by a total of 19 percent since FY09, including by five percent in FY13. But these actions are not enough to deal with the current situation," he said.

Joyce said "no options will be off the table" as he continues lobbying for a more even playing field in Australia's aviation sector, including the easing of foreign investment restrictions or government intervention to shore up Qantas.

"Political leaders recognise Qantas' strategic importance, its critical role in providing essential air services, and the benefits to Australia of a strong and viable national carrier," he said.

"Government action will, however, be key in enabling us to keep competing effectively on a level playing field."

Under the Qantas Sale Act, dating from 1995 when the airline was privatised, foreign ownership in the national carrier is limited to 49 percent, and Joyce wants that revisited in the face of what he described as "unprecedented distortion" by foreign backers of the Australian market.

"Our competitors in the international market, almost all owned or generously supported by their governments, have increased capacity to pursue Australian dollar profits, changing the shape of the market permanently," the Qantas chief said.

He again took aim at domestic rival Virgin Australia, which is now majority owned by state-backed Singapore Airlines, Air New Zealand and Etihad, accusing it of a deliberate "strategy to weaken Qantas in the domestic market" with cheap seats underwritten by foreign cash injections.

Joyce has been locked in a bitter war of words with Virgin in recent weeks over what he has described as "predatory" behaviour by his rivals.

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