Qantas Airways Plans to Cut 1,500 Workers
Posted on: Sunday, 20 July 2008, 06:00 CDT
Australia's top airline, Qantas Airways, will cut 4 percent of its work force and abandon its growth plan for the coming year, saying the business would be at risk if it failed to offset soaring fuel prices.
The plan to cut 1,500 of its 36,000 workers and scrap plans to hire another 1,200 was Qantas's fifth belt-tightening in three months. It has already raised fares twice and cut capacity twice.
Australia's second-biggest airline, Virgin Blue, also said Friday that it would cut capacity by about 3 percent, in addition to a previously announced 6 percent reduction, in the fiscal year 2008- 09, to combat rising fuel costs.
Virgin also said it would introduce new baggage fees starting in mid-August and add a new excess baggage fee starting in September.
The global airline industry faces skyrocketing oil prices, with carriers worldwide shedding thousands of jobs and closing down routes as losses mount, threatening some of them with insolvency.
"This is one of the toughest industries out there," Geoff Dixon, the Qantas chief executive, told reporters.
Qantas's cost-saving plans come close on the heels of large quarterly losses reported by American Airlines and Delta Air Lines owing to rising jet fuel prices.
The soaring cost of fuel has prompted the U.S. airline industry to cut more than 20,000 jobs this year, according to a report by the employment consulting firm Challenger, Gray & Christmas.
At least seven smaller U.S. airlines have filed for bankruptcy or stopped operating this year, with Julius Maldutis of the consulting firm Aviation Dynamics predicting a further 9 or 10 will file for bankruptcy protection this autumn.
Crude oil has fallen about 12 percent from the record last week of $147.27 a barrel on worries over U.S. demand and easing political tensions over Iran, but it is still trading around $130 a barrel, up nearly 30 percent so far this year.
As part of the latest moves, Qantas also cut its forecast capacity growth for 2008/09 to zero, from 8 percent before, and said it would shut call centers in Tucson, Arizona and London.
Dixon said the job cuts were within the airline's budgeting process for 2008-09, but "obviously there will be a cost." More than 20 percent of Qantas's management and head office support jobs will be cut under the proposed restructuring.
Analysts said it was difficult to tell if this would be the end of the belt-tightening.
"Jet fuel prices are extravagantly high around the world, and the unknown is how much people are going to cut back on their air travel in this weaker climate," said Angus Gluskie, a portfolio manager at White Funds Management.
Dixon voiced confidence in the airline's ability to weather the storm - it had reported a doubling of half-year profits in February - but reacted tersely when asked if trade unions should take the job cuts lying down, given his confidence in the future.
He shot back that costs have gone up more than 2 billion Australian dollars, or $1.9 billion, and that "if we do not act, there won't be any unions because there won't be any Qantas."
The airlines of the world stand to lose more than $6 billion this year if fuel costs remain at current levels, the International Air Transport Association estimated recently.
Qantas shares jumped as much as 2.4 percent in a weaker market but closed unchanged at 3.30 Australian dollars. Investors said that the latest cutbacks might not be the last. The stock has fallen almost 40 percent this year, nearly double the drop in the overall market.
Dixon said he hoped that this was the last belt-tightening and said Qantas had hedged about 70 percent of its fuel budget for this year around $115 per barrel of crude oil.
Originally published by Reuters.
(c) 2008 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.
Source: International Herald Tribune
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