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Qantas: $252 million loss, 5000 jobs axed, fleet slashed

By David Flynn     Filed under: qantas

  • Qantas posts record $252 million loss
  • 5,000 jobs to be cut
  • Over 50 aircraft to be deferred or sold

Qantas has revealed a loss of $252 million across July-December 2013, its biggest since the airline was privatised almost two decades ago.

5,000 jobs will be axed from Qantas' 33,000-strong workforce by mid-2017.

Qantas will also shrink its fleet by over 50 aircraft.

Older less fuel-efficient planes such as the Boeing 767 and Boeing 747 will be retired ahead of schedule.

Forward orders for new aircraft – including eight Airbus A380s bound for Qantas and three of the Boeing 787's headed for low-cost offshoot Jetstar – are being deferred to an unspecified date. 

Read: Qantas culls fleet – Boeing 767s, 747 jumbos to go, Airbus 380s & Boeing 787s deferred

Qantas has also put the brakes on expansion plans for Jetstar in Asia.

"We need to take the right decisions in accord with current market circumstances and our balance sheet" said Qantas Group CEO Alan Joyce. "In Singapore, growth has been suspended by the Jetstar Asia Board until such time as conditions improve."

Qantas also says that Jetstar’s Airbus A320 order book has been "restructured".

On the international front, Qantas will shutter its Perth-Singapore route in the third quarter of this year.

The airline says that "Qantas services between Melbourne and London will be re-timed in November 2014 to reduce A380 ground time in Heathrow" in the second quarter of 2015.

This will in turn free up an A380 for additional flying, Qantas says, although it's quick to assure travellers that there will be "no changes to overall capacity on London flights".

One bright spot in today's results is the Qantas Loyalty Division which includes the airline's frequent flyer scheme, which contibuted a record $137 million (before interest and tax) to Qantas' coffers. 

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About David Flynn

David Flynn is the editor of Australian Business Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

 

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1 on 27/2/14 by Koru17

I am normally the first one to take the 'hate' approach to Qantas, but this is quite saddening. While I am a stillwort of NZ/Star I have never had a bad experience on Qantas. It's like the USA airline market.

Air NZ today posted a record high quarter profit, so why didn't Qantas? Both are the mainstay carriers for their respective countries, and both have new alliances.

Hope things clear up for Qantas, and not too many people are put off by the job losses etc.

1 on 27/2/14 by Nicklg

Air NZ nearly went bust several years ago and went through a re-structure. QF needs the same

2 on 27/2/14 by Fonga

Air NZ posts a profit because its costs, particularly labour, are significantly lower than Qantas. If Qantas was able to pay its pilots what Air NZ pays then things might be a little more comparable. Until this union stranglehold on Qantas is broken then the airline will continue to struggle. Reducing the workforce while maintaining capacity (surprisingly there is only one flight cut) will raise productivity, meaning the airline will get a better return on its fixed assets. This is what American and BA did, and they both make money after years of chronic losses.

Couple of things to note in the financial reporting, passenger numbers are up and kms flown maintained. So the airline isn't losing custom or capacity. That doesn't change much with the announcement today. Hopefully the cuts will give it the lean and sustainable productive base it needs to get back to a position to grow again.

Profoundly disappointed that QFi has now totally left the Perth market. At least one of those flights to Dubai should be on Australian metal. It is amazing to think the fastest growing international terminal in Australia will be bereft of a Qantas tail.

Qantas is a great airline. Consistently ranked in the top ten in the world. Jetstar even better in its field. Let's not make the best the enemy of the good. I'm going to keep supporting it.

1 on 27/2/14 by PLATY

Fonga, whereas Joyce may have cited one specific flight cut (PER-SIN) he also said that other flights are going to be cut based on their performance.

This would reduce your assumed productivity gain as he's not going to get the same number of flights (minus one) for 5000 FTEs less on staffing.

He also said that the staf associated with the fleet reduction would go - so again not a big productivity gain there.

I don't see how today's announcements address the structural issues that need to be dealt with. Cost savings through terminal sale/leaseback, staff cuts, etc., are all financial strategies to augment cash flow.

They aren't directly dealing with the real issue: what is the vision for QF!

  • What is its brand (confused by selling seats QF on JQ)?
  • What is is product differentiator?
  • What is the Asian strategy (if to HKG how will pax hub from there?)
  • And domestically what is a sensible target fo market share (it ain't 65%!)
  Of course it's the unions fault! Clearly, QF's problems have nothing to do the failure in setting up an Asian premium airline, not the foundering misadventures of various JQ clones in parts of Asia, not the nonsensical fleet choices, the diminution of the value of the FF scheme, the overpricing, an international network that has been allowed to wither, the management's refusal to engage with its customer base, etc etc   Yep, obviously the unions. Nothing to do with Joyce's woeful mismanagement of the airline.

 

 

1 on 27/2/14 by Fonga

The strategy seems pretty clear to me. Qantas recognises that as an end of line carrier it cannot compete on network or frequency with carriers placed between us and the places people want to travel eg Europe. Between here and there you have all the worlds great airlines that can fly you into a single hub and then onto anywhere you want - Dubai, Singapore, Doha, HK. So how do you compete? By forming alliances to capture as much of the traffic to those hubs as you can and then service those sectors really well. The A380s achieve that, the A330s not so...yet. USA is well serviced. Sth america and Sth Africa are duopoly markets. That's a solid strategy in my mind. 

In Asia you build satellites of yr low cost generic brand with local partners to capture an emerging market. Three hubs in cities you service with yr high end product. Finishing a journey with a short sector on Jetstar is not a killer. These businesses will establish themselves in markets predicted to see the greatest growth in world aviation. Give it time. 

Perfect? Hell no. I would maybe make HK and DFW a daily A380 and drop LAX - NYC. Fast forward the upgrade of the A330 product. And get some metal flying from Perth, Adelaide and Brisbane to Dubai. Ditch Jetstar vietnam. 

Jetstar taking on all the leisure and emerging markets within and from Australia completes the pic. The 65% target attracts a lot of contempt. I guess you would be happy then to see less frequency and domestic network if they cut services according to profit? Domestic still made money although less than it did before expansion. 

Consistency is the key to brand loyalty and Qantas lacks in this dept.  The brand itself is first class, despite the trashing it gets from people and organisations who purport to have its best interests at heart. 

1 on 27/2/14 by mitchimus

I doubt that QF will think about using its own metal our of Perth...they have done nothing but kill off routes and reduce flights and then blame poor performaing routes...still find it strange that SQ can fly 4xdaily to Singapore and QF can't make it work with 1 flight...nothing to do with product - tired A330's or timing I presume.

Maybe they should just own up and rebrand QFi...Qantas - the airline of south east australia

2 on 27/2/14 by PLATY

Yes, Fonga, you are right insofar that:

It's what they appear to be doing

May make good sense

BUT

Having listened to Joyce's sttement (and granted i may have miised something) it's not what he actually said.

Now consider:

JQ international had been responsible for the shockingly appalling $140 million dive in JG profit/loss so the Asian hub into JQ idea is a  DISASTER!

And (based on what I read in the public domain) QF has an unhealthy relatio ship with CX, ths obvious OneWorld partnerto hub out of Asia (HKG).

So evebn if we accpet the (unstated today) strategy, under Joyce its a clusterf--k!

Oh and talk about trashing a brand (which I support being P1 by the way -mainly for the excellent staff) - branding 101 says Joyce & Co have done that by themselves by creating the fuzziness of the JQ and QF demarcation (buy a first clas ticket and travel on JQ - I don't think so).

PS and none of the above is the union's fault.

1 on 28/2/14 by Fonga

Be intrigued to know what you mean by an unhealthy relationship with Cathay. You mean they don't get on, even though they are both Oneworld?

I have a long history with union involvement at Qantas, my father was a union organiser. Believe me the commercial health of the airline is their last concern. There is a genuine belief and hope that one day the airline will return to government hands and they can return to the safe and cushy days of public service employment standards. Things just need to get dire enough for that to happen, because no government could allow Qantas to fail. Remember that when you hear the self-serving twaddle these reps come out with. They, and clearly a few others, need to get over that. Qantas will never be government owned again. It lives or dies by commercial standards.

2 on 27/2/14 by TheRealBabushka

What will likely happen to QF9/10?

Will QF be required to purchase slots at LHR. Or will there be a swap with EK?

Are we looking at a morning/noon depature from LHR? Seems silly to have two A380 leaving in the evenings.

1 on 27/2/14 by Skipp

Yeah, it seems silly that the QF A380's landing in London waste their time on the ground for most of the day, before a departure late in the day.

I imagine this 'rejig' of A380 utlisation should free up an A380 to pickup the extra two days a week (currently operated by 'outgoing' B747-400s) needed for the Sydney - Hong Kong leg, so that a 'daily' A380 service can finally come in to effect between the two cities.

1 on 27/2/14 by Skipp

Another thought bubble. I imagine the reason that the Melbourne - London service has more scope for a change in timing, is due to Tullermarine having no curfew to worry about, unlike Sydney that is timed to have QF2 arrive from London (via Dubai) not long after the curfew is lifted.

1 on 27/2/14 by watson374

Why not run QF 9 to leave Melbourne at night, arriving in Dubai in the early morning, immediately continuing to London Heathrow to arrive just before lunchtime; QF 10 can then leave in the late evening as now, arriving in Melbourne in the morning.

Then, run QF 1/2 according to the old QF 31/32 schedule - leave Sydney in the afternoon to get to London Heathrow in the early morning; leave around lunchtime to arrive in Sydney in the evening.

This way, we have both afternoon and night departures ex-Australia, and lunchtime and night departures ex-LHR.

2 on 28/2/14 by Nicklg

QF have a total of 4 slots at LHR, 2 being leased to BA after they stopped the MEL-HKG-LHR and SYD-BKK-LHR. I am sure they could swap things around

3 on 27/2/14 by Glen

It will be a sad day when you can no longer take an international flight out of Perth on a Qantas aircraft.

The only way to get un-diluted points and status credits is with the disgusting Jetstar Asia or with Emirates...  Very sad indeed...

1 on 27/2/14 by 11sjw

Is the PER-SIN route being scrapped?

1 on 27/2/14 by 11sjw

OK read a little further along and yes it is.  Kind of makes being a QFF in Perth a particularly unappealing proposition.  Does that mean the QFi Lounge will be taken over by CX?

1 on 27/2/14 by Glen

Oh, good question, not sure about that one? 

I guess if there's no Qantas intl flights, there's no need for a lounge which means it won't be available even if you do choose to fly JQ on an intl sector.  Kind of dilutes the benefits of the expensive Qantas Club membership I bought!!  Bummer!

1 on 27/2/14 by Joshb

From a customers perspective I really do feel for Perth, I used to live in Brisbane and the diminishing Qantas international services from there were pretty saddening. Now that I live in Melbourne I have a much better offering from Qantas, however like Brisbane it seems to be diminishing every year since I have been here. 

I just hope they keep QF9/10/93/94 and refurb those A330's quick smart. 

1 on 27/2/14 by Longreach

.

1 on 27/2/14 by Longreach

For those of us who still live in Brisbane, Joshb, especially those of us who know and care a fair bit about the history of Qantas, its gradual desertion of the capital of the state of its birth and its original success, which are acknowledged in little more than the first letter of its unique and evocative name these days is indeed saddening, but it also reflects narrow thinking and an abject failure to recognise that its competitors were happy to fill the gaps created by its concentration on two cities.

It really became SAMAS rather than QANTAS long ago, but given that Melbourne, and particularly Sydney have long had many more international services from which to choose, to concentrate services in those places while withdrawing them from the next two largest states – which have far fewer airline options – was extreme folly.

It still has not occurred to Joyce to increase or to improve the services from Brisbane and Perth, and Adelaide as well, and so compete with foreign airlines which provide much better services to these significant Australian markets, particularly the first, given the population of the state and adjacent areas.

Given the general tone on this forum, as usual it seems to be an I'm All Right Jack attitude (you may have to look that up).

 

2 on 24/3/14 by franz

Anytime soon.Such a shame really.It was through that route my parents moved into Australia from Singapore arriving at Perth spending the day there moving all around the country before settling up in the end in Adelaide which by the way back in 1972 didn't even have an international airport.

4 on 27/2/14 by Travelator

I find it facinating that nobody seems to have noticed that Virgin Australia has been selling most of it's assets to fund it's price war with Qantas (and it's transformation) and is currently running at a loss. No assets and making losses. At some point the "foreign government owned" shareholders will be expecting a return on their significant investment and they will be savage. There will also be no bailout by these shareholders when the going gets tough (see Ansett collapse). If John Borgetti's plan to take market share from Qantas doesn't work, he may end up being the person who killed Virgin.

1 on 27/2/14 by PLATY

Actually, VA has been buying. Skywest, stake in Tiger...

5 on 27/2/14 by PLATY

The most worrying figure is the AUD262 loss on international up from AUD91.

This AFTER the application of the tie up with EK and retiming of flights to Asia, which was supposedly the salvation of the QFi.

The real story is going to be which flights get the chop and how the fleet is distributed.

Hard to see how QFi can escape becoming a boutique A380 carrier to just DXB, HKG and LAX to key hub partners in the shortish term...a de facto extension of EK.

1 on 27/2/14 by Joshb

Agree PLATY, Ideally they should focus the A380's on to the Pacific and capture/secure the market where the Gulf carriers lack influence with their fleets and deep pockets.

 

Maintain A380 to DXB from SYD/MEL (maybe retime one of them) and cut the losses on LHR and redeploy the fleet to DFW. If I were at the helm I would even consider re-opening the QF25 route (MEL-AKL-LAX) with a refurbed A330 and re time it so there is an alternative to QF93/4 to LAX and properly compete with AirNZ in N. America

6 on 27/2/14 by ledj

All Qantas staff (including management) need to take a pay cut. $4 an hour for a year adds up to 275 million $. They get paid more than any other airline. It's not hard.

An apple is an apple but to pay someone $40 an hour to sell it instead of $30 you are not going to be in business long.

1 on 27/2/14 by PLATY

Why not set an example, ledj, go into work tomorrow and offer the idea up to your CEO and be the first to volunteer to take the hit.

Perhaps, be sure your CEO isn't earning $4million, that his/her predessor wasn't eyeing off a $130 million bonus for a private equity deal, that the company is efficiently run....etc

2 on 27/2/14 by PLATY

Also note that Jetstar's performance has crashed by $140 million (despite being paid much lower wages)

7 on 27/2/14 by Bert

The Emperor has no clothes! Why was this not seen well before it hit the fan.

No excuses, take the big fat bonus and bye bye Alan. Thanks for nothing. Join the queue with Sol.

Lets get someone in who understands what customer service is, looks after their current returning loyal passengers and get with the programme that it's a new day. Telstra has done, Qantas can too.

8 on 27/2/14 by Graham S

How is it that a business that is over staffed, hopelessly managed beholden to unions stuck in a 1970's industrial relations time warp gets so much publicity when restructuring? What is so damm special about a flying bus service and who cares who owns it? All this palaver about Perth - Singapore, Perth!!, who gives a toss about an isolated over-priced town when 95% of us live east of the place. And all this QF9,London and suggested flight times,status credits, points etc nonsense; it's bordering on farcical. I wish there was as much attention to building a Tullamarine rail service, or trains and trams running on time than has been spent on this bloated company. Sell Qantas and get over it afterall the amount of whinging that goes on about their service on top of all the other cheap International carrier fares very few could care. 5000 aren't going Friday afternoon and so much of their business could be off loaded and out sourced coupled with retirements and resignations very few will even notice. As long as I get a seat on board & a beer in the QF Club prior ( staff there can be out sourced) what the Hell do I care about how many people Qantas employed no more than I'm interested in how many staff an insurance, mining company or my local milk bar employs

 

   

9 on 27/2/14 by maabbot

I personally spend about 150k on travel per year.  I was at the same time Platinum 1 and SQ PPS...As Qantas has slowly exited the Perth market I have seen my Qantas status drop to Platinum and SQ go to Solitaire.  This year I will struggle to keep Platinum now unless I fly on some oneworld metal.  Qantas' Perth route has underperformed though poor schedule, inferior aircraft and lack of connections.  The PER-SING rout handles 1 million people a year and Qantas can't make it work.  It's one of the top 5 internation routes from Australia and Perth is the fastest growning international market.  Just doesn't add up to anything more than poor management and planning. I am a loyal customer that Qantas has just pushed away. 

1 on 27/2/14 by Alexaqua

You are not the first and you won't be the last.

Qantas has had the wrong attitude for years now!!

10 on 27/2/14 by 11sjw

First job to go one A Joyce? :-)

11 on 27/2/14 by Alexaqua

Qantas is just another legacy airline requiring a clean sweep of overpaid (not by Australian standards but certainly by world standards) staff.

Look at JAL and American both case in points.  

I know many people can sit there and blame Alan Joyce but seriously shouldn't some of the staff take some of the blame?  A huge number of different EBAs, a large number of Unions and staff inflexibility doesn't make things easy.  I know crew refusing to move from the 747 to the A380s because of the change in conditions, does that sound right? Not only is the 747 hugely expensive to operate now, Qantas also has higher crew costs to deal with as well. Is this Alan Joyce's fault? 

Workplace conditions inflexiblity will be the absoulte downfall of Australia, it's already happening as more and more companies close up shop because Australian wages are too high and conditions too good.  Australia is fighting for its economic life in a world market now, our workplace conditions tie one hand behind our backs and we are getting slaughted.

12 on 27/2/14 by Travelator

For those of you who believe unions are never to blame for airline collapes, I would suggest you read the following West Australian Article from 18 Sept 2003. Me thinks we will never learn.

"Virgin's success shows up Ansett"  By Geoffrey Thomas

VIRGIN Blue would carry more passengers than Ansett on major domestic trunk routes this financial year with only a third of the staff, the airline's chief executive, Brett Godfrey, said yesterday.

In the most damming indictment of Ansett's lack of productivity, Mr Godfrey told WestBusiness his airline would carry 10.5 million passengers for the financial year to March 2004, compared with Ansett's 10.1 million in its last financial year.

In another important measure, Virgin Blue's revenue passenger kilometres (RPKs) - passengers multiplied by the distance travelled - should top 16.6 billion, well above Ansett's 16.2 billion in its last year.

And to do this Virgin Blue only needs 3300 staff, against Ansett's 10,000 for its domestic trunk route division. Ansett employed up to 16,000 staff when regional and international airlines were included.

 

*** The article goes on with another interesting point that you might find familar......

 

With more than 30 per cent of the domestic market, Virgin Blue has Qantas Airways firmly in its sights.

"We are now passing 30 per cent market share - that's a big niche and more aircraft are coming soon," Mr Godfrey said.

This ambitious stand puts the airline on a collision course with Qantas, after Qantas chief executive Geoff Dixon declared last month it would fight to retain its market share.

"The Qantas imposed line in the sand must, in my view, shift with the tide," Mr Godfrey said.

"I am of the view that only about 10 to 15 per cent of traffic is hard to obtain under our business model, the rest is up for grabs.

 "We truly believe that 50 per cent isn't beyond our grasp, but I'll be happy to consider stopping at 49 per cent as we are happy to remind consumers that we will continue to be the low-fare battler."

1 on 27/2/14 by PLATY

So, Travelator, so justify your claim, explain EXACTLY how that it is the "unions" fault that AN collapsed?

Factor in the cosy duopoly that both QF and AN were happy to engage in, the asset stripping by Air NZ, 767s so old they had flight engineers, the cracks in the engine mounts, the ancient equipment that hadn't been updated by managemen, etc...

And just to bring the debate up to date (2014 not 2001), explain how the unions determine pay rates (not independant arbitration), determine the ambient industrial relations (not the federal government) the size of the workforce (not QF board/management) the fleet choices (not QF management) the QF Sale Act (not the federal government) the pay rates for JQ Asia (not JG Asia management) the pay rates for EK flights (not EK management) the pay rates for Cobham and JetConnect, idle A320s (11 of them) in JQ Asia, no international servcie sin PER and CNS, etc.

What utter right wing stupid BS!!!

 

 

1 on 27/2/14 by PLATY

PS Look at JQ results - their INTERNATIONAL opertion are the ones responsible for a $140 million negative turnaround. Are you seriously laying THAT at the feet of "Unions"?!

And the 15 flights/day from Australia on EK to DXB (to the two by QF) , the supposed saviour of QFi - those flights are staffed by crews on Australian awards are they?

13 on 28/2/14 by ezihose

Best start at the top and work your way down!

not even the qantas cleaners would have as many dumb business moves as Alan!

he wont get hired in Australia by any company unless they too want to go broke

14 on 28/2/14 by Richrrrd

Such a shame that a national carrier with such a strong global brand is forced to make these kind of cuts and cost-saving measures, unfortunately for me it's no surprise.

As a recent migrant to Australia, from the UK, we've seen it all before with BA - another arrogant national carrier with a strong global brand, who rests on its laurels, whilst moaning about the competition and how life just isn't fair, rather than innovating its products and services and moving with the times.

When I moved to Australia, I knew that I would be required to travel a lot, both nationally and internationally, at that time I had no FF status and no allegance to any carrier. After 2 really bad back-to-back experiences with QF (delay, cancelation, poor service followed, by miserable cabin crew) I had flashbacks of BA and quickly opted for another carrier. For the past 3 years I've travelled almost monthly through APAC (mostly in busy J class - why can't Qantas make their equivalent work for them?), and have been a loyal customer of SIA, their tie-up with VA was the cherry on top for me, so am naturally a loyal VA customer for national and cross Tasman routes - Plat VFF gives me all the perks I need and both VA and SIA provide the perfect service and the cabin crew want to represent their brand.

Unless you are lifers (locked in to QFF) or if you do the AU-US routes regularly, I don't see why anyone would use Qantas.

15 on 6/3/14 by Performa

Wot a nepotisticle board !!!!!!!

 

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