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Thu, May 29, 2008 - Page 10 News List

Qantas set to shed jobs, drop routes and skim its fleet


Qantas said yesterday it would shed jobs, shut down some flight routes and retire aircraft in an effort to control costs as the price of jet fuel soars.

The airline said in a statement that it faces a A$2 billion (US$1.9 billion) increase in its fuel bill in the 2008-2009 financial year, representing about 35 percent of its annual expenditure.

“Despite our fuel hedging strategy, fuel surcharges, two separate across-the-board fare increases and a recruitment freeze, we are not bridging the widening gap between the actual increase in the cost of fuel and the amount we offset,” chief executive Geoff Dixon said in the statement.

Under its plan, Qantas will retire one B737 aircraft, ground two B767s and one Jetstar A320 and cancel the delivery of one Jetstar A321 plane. It will also move faster toward retiring four B747-300 aircraft.

Jetstar is Qantas’ discount arm.

Dixon said Qantas would scale back frequencies and capacity of some domestic and international routes, and cancel other routes.

He also warned there would be staff cuts, starting with an accelerated leave program and voluntary redundancy.

“It is inevitable that a reduction in staff numbers will be necessary in selected parts of our business,” he said.

Qantas’ decision to cut capacity by 5 percent is equivalent to grounding about six aircraft, the statement said.

Merrill Lynch research analyst Kevin O’Connor said Qantas’ plans reflected moves by other airlines across the globe.

“Worldwide you have seen a number of airlines talk about capacity cuts, in the US., New Zealand, Europe and Asia,” O’Connor said. “The simple fact is that because of rising fuel prices they need to push up ticket prices.”

But airlines are having difficulty doing that “in a softening economic environment,” he said, and have to combine price increases with cutbacks in capacity.

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