SYDNEY: Australian airline Qantas Airways plans to axe 500 jobs and cut capital spending by A$700mil (US$749mil) over two years after a bitter industrial dispute and high fuel bills halved its first-half fiscal profit.
Chief executive Alan Joyce said the 13% cut in capital expenditure would come from early retirement of aircrat, withdrawal from some routes and cost controls in the airline's engineering, maintenance, ground handling and catering units.
The cuts were designed to protect profitability and an investment grade credit rating at Qantas, which suffers from a higher cost base than its Asian peers, he said.
Markets welcomed the cost and capex cut plan, while underlying profit before tax of A$202mil (US$217mil) still beat analysts expectations for A$176mil and helped push Qantas shares up as much as 5.4%, their highest in a week.
“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% of its 32,500 employees in Australia, and union fears that it will send jobs offshore helped spark last year's bruising industrial battle that led to the grounding of its entire fleet and promped intervention by Australia's industrial umpire.
“Today Qantas Engineering services costs are at least 30% higher than those of our competitors. And we have the ability to change,” Joyce said in a statement.
He 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.
The review was expected to conclude in 60 days could lead to more job cuts.
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. - Reuters