Qantas will shed thousands of extra staff and even begin selling luxury pyjamas as the airline seeks to cut the costs needed to survive a longer than expected disruption to air travel owing to Covid-19.
The Australian carrier told employees on Tuesday that it would outsource 2,500 cleaning, baggage and ground handling jobs in a bid to save A$100m (€61 million) per year.
The measures are in addition to 6,000 redundancies and 20,000 staff already put on furlough, announced by Qantas in June.
Change
“This is the greatest challenge the aviation industry has ever faced and airlines have to change how they operate to ensure they can survive long-term,” said Alan Joyce, Qantas chief executive on Tuesday.
Qantas has grounded 220 of its aircraft, stood down most of its staff and mortgaged its planes to raise cash, Mr Joyce added, but further cuts were required.
As part of efforts to raise cash the airline has also begun selling the kangaroo-emblazoned pyjamas it usually hands to business class passengers for A$25 each.
Qantas said that about 10,000 pairs of the pyjamas, which the company had a backlog of after grounding its aircraft, had sold out within hours. The airline has no plans to sell more for the time being, the company added.
The company has also made Tino La Spina, the head of its international business, redundant as Qantas anticipates that it will not restart non-domestic services until mid-2021.
It is also gearing up for tougher competition on domestic routes following US private equity group Bain’s A$3.5 billion takeover of Virgin Australia.
The resumption of services within Australia could also be hit by a resurgence in coronavirus cases in the country, analysts said.
“There was an expectation the domestic market would open up but the resurgence of Covid-19 suggests this isn’t going to happen at least before Christmas,” said Peter Harbison, emeritus chairman at research firm Capa Centre for Aviation. “Qantas are burning A$30-40 million a week – this is hurting them.”
Forecasts
Qantas forecasts that revenues will fall A$10 billion and it will record significant losses in the 2021 financial year owing to Covid-19. The airline reported pre-tax losses of A$2.7 billion and A$14.2 billion of revenue in the year to June despite receiving more than A$500m in government support.
Angus Hewitt, an analyst at Morningstar, said Qantas’ cash balance of A$3.5 billion and A$1 billion in undrawn credit facilities as of June should support the airline to the end of 2021.
Australia’s Transport Workers’ Union has called on Mr Joyce to resign due to the airline’s “callous abuse” of a government furlough scheme.
“Qantas has taken millions [of Australian dollars] in Jobkeeper wage subsidies, more than any other company, with the express intent of keeping people employed,” said Michael Kaine, TWU national secretary. “But now Alan Joyce wants to destroy thousands more livelihoods.” – Copyright The Financial Times Limited 2020