Struggling Australian carrier Qantas on Thursday said it will axe 5,000 jobs, defer aircraft deliveries and suspend growth at Asian offshoot Jetstar in a major shake-up after deep first-half losses, warning of more pain to come.
The airline, battling record fuel costs and fierce competition from subsidised rivals, posted an interim net loss of A$235 million (US$210 million) in the six months to December 31 as it faces some of its toughest conditions ever.
Underlying loss before tax -- the airline's preferred measure of financial performance -- came in at A$252 million, a figure chief executive Alan Joyce called "unacceptable and unsustainable".
"Hard decisions will be necessary to overcome the challenges we face and build a stronger business," said Joyce, who will take a 36 per cent wage cut as the company works to slash costs by A$2 billion over three years.
Part of the restructure will see 5,000 full-time positions lost from the carrier's 32,000-strong workforce by 2017 with a wage freeze across the network until the airline returns to profit.
"I regret the need for these wide-ranging job losses, but we will do everything we can to make the process easier for employees who leave the business," Joyce said.
"At the end of this transformation, Qantas will remain an employer of more than 27,000 people, the vast majority based in Australia -- and we will be a better and more competitive company."
Australia's Labor opposition called it "the worst day for aviation people since the collapse of Ansett", referring to the former Australian airline that went under in 2001, while unions said workers were being punished for poor management.
"Qantas management has today outlined a demolition job, but failed to follow through with a strategy for how it will grow the business and serve the national interest," said Nathan Safe, president of the influential Australian and International Pilots Association.
The carrier flagged "significant changes" to its fleet plans and network and a reduction in capital expenditure of A$1 billion across the next two financial years.
This will see the selling or deferred delivery of 50 aircraft, including the eight remaining Airbus A380s it has on order.
"Tough decisions" ahead
Qantas will also axe its Perth to Singapore route and suspend new growth plans for Jetstar.
"When it comes to Jetstar in Asia, we need to take the right decisions in accord with current market circumstances and our balance sheet," said Joyce.
"In Singapore, growth has been suspended by the Jetstar Asia board until such time as conditions improve."
Following an interim profit warning in December, Moody's and S&P both downgraded Qantas' credit rating to "junk" status, increasing its financing costs and restricting access for investors who do not put their money in lower-rated companies.
Qantas has since been working to convince the government it deserves a debt guarantee, while lobbying Canberra to relax the Qantas Sale Act which limits foreign ownership in the airline to 49 per cent.
Joyce argues that the cap, which restricts access to capital, is hurting Qantas' ability to compete, particularly against domestic rival Virgin Australia -- majority-owned by state-backed Singapore Airlines, Air New Zealand and Etihad.
Australia's conservative government said this week it was drafting laws to allow Qantas to be majority foreign-controlled and for a single foreign shareholder to own more than 25 per cent.
But the legislation is unlikely to pass through the upper house Senate with Labor and the Greens opposing majority overseas ownership, while remaining open to an assistance package.
Joyce warned of more difficult decisions ahead.
"We must defer growth and cut back where we can, so that we can invest where we need to. We have already made tough decisions and nobody should doubt that there are more ahead," he said.
Qantas shares closed nine per cent lower at A$1.15.5.
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