Qantas has flagged a loss as high as $300 million in the six months from July to December this year and will embark on an aggressive cost-cutting campaign to recoup $2 billion over three years, in response to what the airline described as "fundamentally changed market conditions".
The airline will axe "at least 1,000 positions within 12 months" while Qantas Group CEO Alan Joyce and the Qantas board will take an undefined pay cut. Airline executives will have their pay frozen at current levels and receive no bonus for the 2014 financial year.
Qantas will also run the ruler over spending with its top 100 suppliers and launch "an immediate review to identify structural changes that could potentially unlock sources of capital and value for shareholders."
"No options will be excluded from the review" the airline said in a statement, signalling that everything is on the table.
A focus on "broad-ranging network optimisation and improved fleet utilisation" could also have impact for travellers with the winding back of some domestic and international flights.
The airline cites "a marked deterioration in November in particular" in the market, "with both passenger loads and yields below the already negative trends for the year to date."
And the next six months don't look much better, with Qantas predicting lower passenger loads (1.6 % below the first half of 2013) and higher fuel costs (an extra $88 million on top of the $2.27 billion from the first half of this year). The second half of the calendar year is typically stronger for airlines than the first.
Yields – the airline's actual return on each ticket sold – are also set for a group-wide slump of 3.5% against the same period last year.
Qantas reported a wafer-thin net profit after tax of $5 million for the 2012-13 financial year, following a loss of $245 million the year before, but today's announcement shows that the Qantas Group – which includes Qantas, QantasLink and Jetstar – will fly back into the red.
Joyce hits out at Virgin, overseas competitors
Qantas CEO Alan Joyce continued to single out competitors, especially Virgin Australia, for compounding "a fiercely difficult operating environment - including the strong Australian dollar and record jet fuel costs, which have exacerbated Qantas' high cost base."
Joyce cited "unprecedented distortion of the Australian domestic market with Virgin Australia's strategy to seek major ownership and massive financial backing from government-owned airlines."
"Our competitors in the international market, almost all owned or generously supported by their governments, have increased capacity to pursue Australian dollar profits, changing the shape of the market permanently."
''We cannot and we will not stand still in these extraordinary circumstances" Joyce said, although he allowed that despite ongoing discussions with the Federal Government over various forms of support for the airline, "none of the measures being discussed with the government would alleviate the need for us to take the comprehensive actions we have announced today."
"Government action will, however, be key in enabling us to keep competing effectively on a level playing field."
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