Qantas is slashing 1000 jobs and costs as it braces for its worst ever first half loss of up to $300m, sparking talk of asset sales and fleet delays
Qantas is slashing 1000 jobs and reining in costs as it braces for a record $300 million first half loss.
The airline’s share price dived more than 11 per cent on Thursday after announcing it expects to post a half-year loss of up to $300 million.
Analysts believe Qantas will be forced to delay upgrading its fleet and sell assets such as its prized frequent flyer business as it looks to save $2 billion over the next three years.
Management will conduct a company-wide review which will examine loss-making areas such as the international business.
Chief executive Alan Joyce is eager to protect Qantas’ dominance of the Australian domestic market and hold on to his own job amid all the turmoil.
“We honestly believe that there is a need to accelerate the cost reductions,” Mr Joyce told reporters.
He said everything would be put under the microscope as the company looked to protect its “profit-maximising domestic position”.
Mr Joyce would not rule out spinning off the frequent flyer business or making significant changes to its international business.
Qantas on Thursday flagged an underlying loss of between $250 million and $300 million for the six months to December 31, which would be the largest first half loss since the company listed.
The news caused Qantas shares to initially drop 17 per cent before recovering to close 11 per cent lower at $1.07.
Mr Joyce also conceded that the airline’s strategy of boosting domestic capacity to maintain its 65 per cent market share had contributed to the profit downgrade as it battles rival Virgin Australia.
“We’ve seen too much capacity being added and that’s made the situation of a weak environment worse,” he said.
Trading conditions deteriorated markedly in November with a steeper decline in passenger loads and yields.
Despite presiding over one full year loss and thousands of job cuts since taking over as the Qantas boss five years ago, Mr Joyce said he continued to have the backing of the board. “The board have been very supportive in all of this and the board understands the dynamics that have been facing the marketplace,” he said.
Mr Joyce’s $3 million pay will be cut by at least 38 per cent this financial year due to the airline’s poor performance.
It comes as Qantas continues to talk to the federal government about possible support for the airline.
Mr Joyce hit out again at rival Virgin Australia and its major shareholders: Air New Zealand, Singapore Airlines and Etihad, saying there was now a major distortion in the domestic market.
Qantas has repeatedly criticised Virgin’s planned $350 million equity raising, which will see the three foreign airlines increase their ownership stake.
In August, Australia’s major airline swung to a $5 million full year profit, from a historic $245 million loss in the previous year.
Qantas shares closed 13.5 cents, or 11.2 per cent, lower at $1.07.