Australian flag carrier Qantas said Wednesday it will slash capacity and jobs as it grapples with disasters and surging fuel costs in its "most serious challenge" since the global downturn. The announcement comes with the airline already facing threats of strike action from thousands of members over pay and job security.
Chief executive Alan Joyce said there had "never been a time when the world faced so many natural disasters", with earthquakes in Japan and New Zealand and Australia devastated by floods and cyclones. The calamities had come at "significant financial cost" he added, with Australia's wild weather prompting Aus$80 million ($82.5 million) in cancellations, delays, lengthy airport closures and other costs. New Zealand's killer earthquake last month wiped $15 million off the bottom line while the tremor and tsunami in Japan brought another $45 million hit.
"We didn't cancel services but obviously the loads on those flights, especially going into Tokyo, did drop off quite significantly," a Qantas spokeswoman told AFP. Meanwhile, a surge of almost 50 percent in the price of fuel since September to $131 a barrel had left the airline under significant financial pressure with second-half fuel costs estimated at Aus$2 billion.
"The significant and sustained increases in the price of fuel is the most serious challenge Qantas has faced since the global financial crisis," Joyce said. "We need to act decisively to respond to rising fuel costs and natural disasters, just like we did during the global financial crisis, to ensure the ongoing sustainability of our business."
The carrier hiked airfares and other charges earlier this year in response to rising fuel costs but said it would not be able to recover "the full impact of current and forecast fuel prices." Qantas posted a four-fold increase in net profits to $241 million for the six months to December 2010, despite an Airbus A380 engine explosion that sent shudders through the industry.
The airline grounded its entire superjumbo fleet after the November blast in an episode Joyce said would cost $80 million in the 2011 financial year. Joyce said Qantas' domestic and international capacity would now be slashed and services to Japan either suspended or downsized, while flights to New Zealand's earthquake-hit Christchurch would also be reduced.
Management positions would be trimmed and two ageing Boeing 767s retired early. Qantas is already facing strike action over wages and the use of cheaper contract workers, with about 9,000 employees threatening to walk out earlier this month. Staff want a four percent pay rise with additional superannuation payments, as well as job security clauses.
Tony Sheldon, head of the influential Transport Workers' Union, accused the airline attempting to influence wage negotiations by crying poor. "The fact is Qantas announced a four-fold increase in profits in February, they bought three planes in cash earlier this year, and at the end of last year the top nine executives at Qantas patted each other on the back with a 58 percent pay increase," said Sheldon. The airline struck an upbeat tone in its half-year results last month, saying pre-tax annual profits would be "materially stronger" than 2010's $377 million as demand recovered, especially for business travel.
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