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Qantas results: Airline posts $252 million loss, cuts 5000 jobs, freezes wages

Yahoo Finance AU

Australia's national carrier Qantas has confirmed it will cut 5000 jobs from its 32,000-strong workforce, after announcing a $252 million half-year loss.

Qantas, battling record fuel costs and fierce competition from subsidised rivals, is working to slash costs by $2 billion over three years.

It will sell or delay delivery of more than 50 planes from Airbus Group NV and Boeing Co., eliminate one in seven employees by 2017, and freeze pay until the company returns to profit, the carrier said in a statement today.

Related: Union to 'fight for every Qantas job'

The carrier also announced a reduction in capital expenditure of $1 billion across the next two financial years.

Qantas CEO Alan Joyce has defended the job cuts while arguing that the 93-year-old airline can’t compete in a domestic fare war with Virgin Australia whose three biggest shareholders are state-controlled foreign airlines that he says want to weaken Qantas’s international business.

Through the day, Yahoo!7 Finance brought you the live coverage of the announcement, Alan Joyce's statement, and reactions from politicians and workers' union. Below are the highlights as the events unfolded.

Pressure on PM

2.20 pm: Opposition leader Bill Shorten has questioned Prime Minister Tony Abbott what plan the government has to assist the 5000 workers who will be left without a job in the Qantas shake-up.

The Prime Minister acknowledged the airline’s future is a “very serious topic” and said today was a “difficult and anxious day”.

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“I am not going to get into the business of being critical of a company and a management which are doing their best to secure their future,” Abbott said.

“We are determined to do what we can for Qantas, consistent with the responsible economic management.”

Related: Lessons from Qantas disaster

Where the cuts will be

1.30 PM: Of the 5000 jobs that Qantas plans to let go, nearly 1000 are linked to previously announced closures at the airline’s heavy maintenance facility at Avalon and at the Adelaide catering facility.

Australian Licenced Aircraft Engineers Association federal secretary Steve Purvinas believes 175 of the association’s members will lose their jobs, including about 53 in Melbourne and 65 in Sydney.

The Australian Manufacturing Workers Union fears about 100 of its members will lose their jobs, with the majority to go in Brisbane but workers in Melbourne and Sydney also set to be affected.

In Adelaide, the Australian Services Union has told The Advertiser redundancies would be offered to 100 baggage handlers plus 100 other ground staff, including check-in assistants.

The location of other job cuts is expected to be made clear in the coming days.

Union threatens strike

12:15 PM: A major union is threatening strike action after Qantas announced it is axing 5000 jobs over three years.

Transport Workers Union national secretary Tony Sheldon has called on the federal government to meet with the airline to find ways of avoiding the job cuts.

"But if (Treasurer) Joe Hockey's not prepared to do that, then it's industrial action that the workforce should be considering," Mr Sheldon told reporters in Sydney.

"In this country, if the government won't stand up for jobs and for the Australian icon, then we will." Read more about it here

11.50 AM: Labor says it is prepared to consider backing a debt guarantee for Qantas to shore up Australian jobs, but not majority foreign ownership.

The airline announced on Thursday it would shed 5000 jobs in a bid to cut $2 billion in costs over three years after revealing a half-year loss of $252 million.

Opposition leader Bill Shorten has described the job cut news as “truly devastating”, and has accused the government of "teasing" the airline with the possible offer of a debt guarantee.

“It’s unforgivable not to fight for the jobs of Australian workers,” the Opposition Leader told reporters in Parliament House. “Today is a day for the Abbott government to show some leadership.” Read more about it here

Related: Lessons from Qantas disaster





Related: Government "deeply regrets" Qantas job cuts

The big picture

11:10 AM: Big takeaways from Qantas presser

- Over the next three years, 5,000 jobs will go.

-There will be a reduction of management and non-operational roles by 1,500.

- The closure of the Avalon maintenance base as previously announced.

- There will be a wage freeze for all Qantas employees until Qantas is profitable again.

- The plane fleet will be changed significantly. 50 aircraft to be deferred or sold over the coming years. The fleet will go from 11 aircraft types down to seven.

Live: Track the Qantas stock

Alan Joyce: "This is unprecedented and unacceptable"

10: 40 AM:  Highlights from Alan Joyce's presser

- There are many examples of Australian companies that have failed because they have not been prepared to make the hard decisions. Qantas is not one of them. Over a 93-year history, Qantas has a reputation of resilience and adaptation.

- We have survived through wars, we have survived through crises, through boom, through bust. Over the past five years, we have shown yet again that we can take the tough decisions to adapt to a changing world.

Comment: Has Qantas actually arrested its nosedive?

- We are now enduring some of the toughest decisions and some of the toughest conditions that we have ever had to face. We are doing what is right and what is necessary.

- I'm absolutely committed to Qantas. Going forward we believe that obviously the circumstances that Qantas faces today are very difficult. We have the capacity situation internationally and domestic cally that's adding to significant losses to our international business in particular but we have a plan to fix that problem, a plan that covers every aspect of the changes we need to make in the business to get it back to profitability. We have the courage and commitment as a management team to make that happen.

-  We have previously announced the closure of heavy maintenance facilities in Tullamarine that closed this year and Avalon that will close at the end of this month.

Because of the changes, aircraft need less maintenance. When you need less maintenance, you need less people and do the maintenance in different ways.



10.30 AM:

Reports say Qantas are adding more staff to their terminals in case there is any industrial action. Virgin is believed to be doing the same to deal with any chaos created.


10.20 AM: “We are facing some of the toughest conditions Qantas has ever seen,” Qantas chief executive Alan Joyce has  said.

“Australia has been hit by a giant wave of international airline capacity, with a 46 per cent increase in competitor capacity since 2009 — more than double the global increase of 21 per cent over the same period.

Related: Air NZ announces big result

“The Australian domestic market has been distorted by current Australian aviation policy, which allows Virgin Australia to be majority-owned by three foreign government-backed airlines and yet retain access to Australian bilateral flying rights,” he said.


“Late last year, these three foreign-airline shareholders invested more than $300 million in Virgin Australia at a time when, as Virgin Australia reported … it was losing money. That capital injection has supported continued domestic capacity growth by Virgin Australia despite its growing losses,” he said.

Live: Track the Qantas stock

“Qantas has been undertaking its biggest-ever transformation over the past four years … but this is not enough for the circumstances we face now.

“With … economic changes being exacerbated by the uneven playing field in domestic aviation, we must now take actions that are unprecedented in scope and depth.”

Have your say: Should government help Qantas?

“Hard decisions will be necessary to overcome the challenges we face and build a stronger business.”:

This decision is shortsighted

10:15 AM: The Australian Services Union says Qantas decision to shed 5000 full time workers across the Qantas Group is short sighted and that they will fight fight for every job.

The ASU represents workers in airport check-in, head office, administration and finance, call centres, freight and engineering clerical workers and administrative, operations and technical staff.

10:10 AM: Few more highlights from the annoucement

- More than 50 aircraft will be either deferred or sold.

- Qantas will reschedule A380 flights between Melbourne and London in November to reduce the waiting time at London’s Heathrow Airport. No mention of ditching the route though, as had been speculated.

- The airline will also retire six Boeing 747 jumbos in the second half of 2015-16, and all of its Boeing 767s will be retired by the first quarter of 2014-15.

- It has also suspended growth at Jetstar Asia in Singapore amid intense local competition.

Related: Qantas CEO snags $1 million

9:50 AM: To contain costs Qantas says it is expecting to incur approximately $500 million in redundancy costs across financial years 2013/2014 and 2014/2015.

9:40 AM: Qantas will also freeze employee wages until return to profit. The airline has also said in its announcement that discussions around Melbourne and Sydney airport will continue.

9:30 AM: Qantas has just posted a $252 million half-year loss and has announced it will cut 5000 full time positions.

Live: Track the Qantas stock

Chief Executive Officer Alan Joyce said the result was unacceptable and comprehensive action would be taken in response.


“We are facing some of the toughest conditions Qantas has ever seen,” Mr Joyce said. “Australia has been hit by a giant wave of international airline capacity, with a 46 per cent increase incompetitor capacity since 2009 more than double the global increase of 21 per cent over the same period.

Related: Air NZ announces big result

“The Australian domestic market has been distorted by current Australian aviation policy, which allows Virgin Australia to be majority-owned by three foreign government-backed airlines and yet retain access to Australian bilateral flying rights.

9:27 AM: Seven News journalist Mark Riley has tweeted that nearly 5000 jobs are expected to go in Melbourne and Adelaide.


9 AM: In its results annoucement, the airline has said it will dispose of its long term lease at Brisbane airport.

Qantas holds a 31 year lease, signed in 1987, on the northern end of the Domestic Terminal at Brisbane Airport which is due to expire on 30 December 2018.


Under the new arrangements, Qantas would retain exclusive use and operational control over much of the northern end of the terminal until the end of 2018 while securing rights to key infrastructure beyond this period.

In addition, BAC plans to make a significant investment in upgrading and improving facilities and services within the terminal, such as lounges and will assume control of the retail space of this part of the terminal.

Will Government help Qantas?

The Government has been waiting to see the figures before it makes a decision on how it might help the struggling airline.

Live: Track the Qantas stock

There are several ways the Government could assist the company, including changing the Qantas Sale Act or providing the airline with a debt guarantee.

But sources have told the ABC it is unlikely to offer a debt guarantee as an immediate solution.

Independent Senator Nick Xenophon says the Government should not help Qantas until the company overhauls its management, which he says has "presided over a disastrous strategy".

Earlier this month, Qantas chief executive Alan Joyce delivered a speech increasing pressure on Coalition MPs to "change" government policy or risk the airline losing its status as national carrier.

The act currently restricts foreign investment to 49 per cent in total and to 25 per cent for any one foreign entity.

It also requires that most of the airline's heavy maintenance, flight operations and training - and the jobs associated with this work - be located in Australia.

Shareholders have not received a dividend from Qantas since 2009.