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Qantas chief Alan Joyce cuts 5000 jobs

Qantas will axe 5000 jobs, ditch unprofitable routes and retire ageing gas-guzzling planes, in the biggest shake up of its operations since it was floated.

Jens Meyer and Matt O'Sullivan

Updated February 27, 2014 — 1:39pm,first published February 27, 2014 — 8:17am

1.39pm on Feb 27, 2014

That brings us to the end of this live blog - but not to our coverage of Qantas' restructuring plans.

Come back to this website later this afternoon for more updates and analysis.

For a wrap of today's events, click here
Adele Ferguson's comment: Qantas pain not over as more hard calls await Joyce
Warren Truss blames high costs and wages for Qantas' woes

1.22pm on Feb 27, 2014

Some more reactions, this time out of Victoria and Queensland:

Victorian Premier Denis Napthine says Qantas' decision is disappointing and he's still trying to get information on where job losses will occur.

Napthine said he understands that most job losses will be outside the state.

He said the government will work with the company and other governments to help sacked workers find new work.

Napthine said he has confidence in the Victorian economy and says jobs are growing.
He said the state government has a positive relationship with Qantas, in particular Jetstar.

But state Oppositon Leader Daniel Andrews said the Napthine government had no plan for jobs in Victoria. He said the Premier took the credit for every new job created but blamed companies or ''some other factor'' when jobs were lost.

He said Qantas workers in Victoria would have a tough time retraining because the TAFE sector had been ''gutted'' by state cuts:

This is a tragedy. We as a state used to lead the way, now we have slipped so far behind and Victoria deserves better than a premier as a bystander.
Qantas is a national company, an international company really, it has no allegiance to our state, it is not the job of Qantas to be championing Victoria - that's the job of the Victorian government.
All he (Napthine) does is go to photo opportunities with Tony Abbott after more job losses.

Meanwhile, up in Queensland Deputy Premier Jeff Seeney had the following to say:

Well it is very disturbing for us to see any potential job losses in Queensland, but at the end of the day, Qantas, like other companies, has to be able to operate profitably.
We are very happy to work with Qantas to do what we can as a government to ensure that they do operate profitably, we will continue to work with them to make Queensland an attractive place for them to do business and for them to place considerable amount of their operations and we are waiting like everyone else today to see the details.

1.20pm on Feb 27, 2014

Trust us on the benefits of its tie-up with Emirates, is a message out of the analyst brifing. Qantas didn't reveal the financial benefit of its alliance but talked up how it's received strong support from customers.

Qantas International chief executive Simon Hickey said the tie-up provided the airline with a competitive network, giving it one-stop services to continental Europe.

But he declined to give a figure on its financial benefit to Qantas, citing commercial confidentiality.

1.11pm on Feb 27, 2014

Ahead of tomorrow's key meeting in Sydney between Qantas management and unions, the latter are ramping up the rhetoric:

Australian Services Union private sector section secretary Ingrid Stitt vows to ''fight for every job'':

''It is going to be a really tough for anyone who works at Qantas,'' Stitt says. "I am very concerned about anyone losing their job in Victoria given the current climate.

"There are thousands of people employed by Qantas and Jetstar across the group and I think it is very important to fight for every one of those jobs."

Stitt says the union is always prepared to talk with the airline but has to balance the company's needs against its members' wishes. She says the union will need to assess the company's claim that it needed a wage freeze until it's in profit.

"That is an indefinite claim. We will have to talk that through carefully with our delegates and our members and we expect to get more information about that tomorrow.''

Linda White, assistant national secretary of the ASU, which represents check-in, clerical, finance and administration staff, said Qantas has indicated 1500 ‘‘back office’’ jobs will be lost. She said the company had spoken about the positions ‘‘as if they don’t do anything’’.

She says he union will oppose a staff wage freeze when it meets with Qantas officials tomorrow. More than 60 per cent of the workers earn base salaries of $37,000 to $57,000 and 35 per cent are part time.

Transport Workers Union national secretary Tony Sheldon notes each baggage handler, check-in staff and ramp worker generates a $205,000 return to Qantas above the cost of their employment.

‘‘Sacking them is like a tradesman selling his tools to pay a one-off bill,’’ he says.

1.03pm on Feb 27, 2014

Alan Joyce is spot on when he says the $252 million loss reported by Qantas is "unacceptable" and "unsustainable", Adele Ferguson writes in a comment:

Shareholders obviously think so too, with the share price plunging after the company released its long-anticipated half year results.

The problem is Joyce is yet to outline the full details of a big strategic review, which was expected today.

Will its frequent flyer business be floated? What other assets might be sold besides the terminals? And most importantly, how will unions and the Abbott government react?

Qantas has announced 5000 jobs will go over the next three years, shrinking the workforce to 27,000. It will also call for a wage freeze across the company.

How wage freeze discussions will go down will be interesting given the carrier has 14 different union groups and 54 enterprise bargaining agreements, each of which are open for negotiation at various times. It will be interesting to see how the unions react and whether it triggers industrial action.

Read more

12.58pm on Feb 27, 2014

The analyst briefing has come to an end now. Here are some more points that were mentioned (or not):

Regarding Qantas International, no details were given on which regions are bleeding the most.

The fall in the dollar has driven a lot of profits out of Australia for foreign carriers. But because much of the new capacity has come from state owned carriers, this means they are slower to respond to revenue shifts.

As for selling off other terminals beyond Brisbane, progress may take time.

"Sydney discussions have been ongoing for a long period of time," analysts were told, with "significant operational issues to resolve" since this terminal is the hub for the groups domestic operations.

As for Melbourne, talks are at an earlier stage, and even earlier for Perth.

Qantas is profitable domestically especially since it has more than 80 per cent of the corporate market, the airline says. Hence its network spread and frequency is fundamental.

At the leisure end of the domestic market, Jetstar has a strong competitive position also thanks to the network, Joyce says:

You lose that advantage to your peril ... at both ends of the market. That is the key. We're not the aggressor in adding capacity, and Virgin-Tiger will add more capacity, even though it continues to lose money.
We need to keep that relative competitive position at both ends of the market.

12.52pm on Feb 27, 2014

Qantas has made it clear the tie-up with Emirates played a key role in shoring up its competitive position on the European route, says Brian Robins who's been listening in on the analyst briefing for us:

The Emirates alliance provides a competitive network, analysts have been told, since it allows a one-stop to-Europe trip whereas Qantas before the alliance had two stops.

"In terms of keeping our customers it has been very significant," analysts were told, but no financial details of the tie-up were given.

But the million dollar question is when will Qantas be profitable again?

"When and where that will happen will depend on ... exchange rate, fuel prices and the level of competitor activity," Joyce says.

But the focus from here will shift to negotiating with Qantas unions - in particular, avoiding industrial unrest which could disrupt flights.

Joyce says that he is to meet the head of the ACTU tomorrow, along with other union heads.

Focus will now shift to negotiations with the unions, to ensure there's no industrial action that would lead to flight disruptions.Bloomberg

12.35pm on Feb 27, 2014

Some reactions from the Opposition in Canberra coming in:

Opposition Leader Bill Shorten says Qantas’ decision to cut 5000 jobs is the worst day for aviation in Australia since the collapse of Ansett and has accused the government of inaction as the airline signalled a need for support back in December.

Shorten says Labor will continue to support the airline being majority Australian-owned, as well as keeping its head office and board Australian-based.

He says it's time the federal government made clear whether it will offer a debt guarantee to the airline, rather than playing games and focusing on changes to the Sale Act:

They have been sending messages if Qantas makes what the Abbott government calls the hard decisions, they would come in behind them, they have been saying they would consider a debt guarantee.
Is it the case Qantas has made the very hard decisions, will the Abbott government back up what they have been hinting and promising the market, consumers, the aviation public or will they play political games and focus solely on the Sale Act?
The rest of the world has government intervention in their airlines. We would be the bunnies if we just waved goodbye to an Australian icon. If we believe there is a level playing field and somehow the rest of the world isn't investing in their airline, that would be a mistake.

Greens deputy leader Adam Bandt says the government should seek guarantees jobs would not be sent offshore before moving to offer support to the airline:

Alan Joyce and Qantas are a flight risk. Money and jobs could be on the next 747 flight to Singapore or Kuala Lumpur, if foreign ownership rules are relaxed and no conditions are put on government support.
It’s incredibly disappointing to see Labor today suggesting that they are open to increasing foreign ownership in Qantas. The Greens have been firm in our commitment to government support of Qantas, but only with a guarantee to protect local jobs.

Worst day for aviation since the collapse of Ansett, Bill Shorten says.

12.24pm on Feb 27, 2014

By omission, Joyce has made it clear the Qantas International arm is where the cuts have to come for the group to survive in its present form, Brian Robins notes:

In answer to an analyst question, he said that domestically Jetstar's cost base is 11 per cent below Tiger and 35 per cent below Virgin.

So clearly, this begs the question about the cost base of Qantas International, while also highlighting why Qantas is adamant about maintaining its domestic market share.

With 68 weekly services Perth-Singapore, capacity is a clear issue. Hence the cuts outlined earlier.

As for the "cost out program" to use analyst-speak, that will be focused on those groups in proportion to their costs, but even Jetstar won't escape the razor.

"Jetstar has a lower costs base so the scope for cutting costs is lower" but cuts will still be made.

At the same time, Qantas International will struggle to break even through 2015 given capacity pressures and the higher oil price, Joyce says.

12.21pm on Feb 27, 2014

More from the analyst briefing currently occurring in Sydney:

At its heart, Qantas intends removing $2 billion in costs by financial 2017, partly by deferring growth and by limiting capital spending to cash flows.

The measures include fleet and network changes, productivity measures, consolidation at head office and the maintenance changes such as closing the Avalon heavy maintenance unit over the next months.

"A cornerstone is changes to labour productivity," Joyce says, with the 5000 jobs to be cut by fiscal 2017, with 4000 to be cut by 2015 including 1500 from management.

Redundancy costs will be booked in 2014 and 15 of altogether $500 million, analysts have been told.

In Singapore growth of the Jetstar Asia joint venture has been suspended until conditions improve, Joyce re-iterates at the analyst meeting.

Overall Qantas intends deferring or selling more than 50 aircraft, with the focus on the A320 aircraft both domestically and internationally as it pursues fleet simplification which will reduce maintenance costs.

Qantas chief Alan Joyce cuts 5000 jobs

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