AUSTRALIAN AIRLINE Qantas Airways plans to axe 500 jobs and cut capital spending by 700 million Australian dollars over two years, after a bitter industrial dispute and high fuel bills halved its first-half profit.
Chief executive Alan Joyce said the 13 per cent cut in capital expenditure would come from a delayed intake of new aircraft due to manufacturer delays and cuts in planned domestic capacity.
The airline will withdraw from some routes and cut costs in its engineering, maintenance, ground handling and catering units.
The news sent its shares higher by 8 per cent to a three-month high, although the stock is still down by about a third over the past year.
The cuts are designed to protect profitability and an investment grade credit rating at Qantas, which suffers from a higher cost base than its Asian peers.
Markets welcomed the cost and capex cut plan, while underlying profit before tax of Aus$202 million still beat analysts expectations for Aus$176 million.
“The cut in capex now reduces the risk of an equity raising,” said David Liu, head of research at ATI Asset Management.
The global airlines industry has been struggling to pass on higher fuel costs to customers as demand for business and leisure travel dwindles due to the global economic slowdown.
Qantas employs over 90 per cent of its 32,500 employees in Australia, and union fears that it will send jobs offshore helped spark last year’s bruising industrial battle.
“Today, Qantas Engineering services costs are at least 30 per cent higher than those of our competitors. And we have the ability to change,” Mr Joyce said.
Qantas would review its heavy maintenance operations in Australia, given the introduction of new aircraft such as A380 super jumbos and Boeing 787s was lowering the age of its fleet, he said.
The airline also planned to consolidate some engineering, ground and maintenance operations in its Sydney hub, and was in talks to sell some catering centres. The changes should be positive for plans to return the international operation to profitability, Credit Suisse analyst Anthony Moulder said. – (Reuters)