Qantas to shed 5,000 jobs

February 26th, 2014 at 7:00 am by David Farrar

News.com.au reports:

is gearing up to axe 5000 jobs and sell its terminal at MelbourneAirport to prove to the Abbott Government it can make the tough business decisions required to obtain federal assistance.

The airline may also take the razor to its budget offshoot Jetstar, slashing jobs and routes, as it lobbies the Government to provide it with a lifesaving debt guarantee.

Job cuts, previously forecast to be 2000, are now expected to be closer to 5000.

They have around 33,000 employees so that is a massive one in seven or so to go.

With the airline already forecasting a loss of $300 million, a radical overhaul of operations is being finalised, with the company determined to show real reform in order to secure the debt guarantee it has been seeking from Treasurer Joe Hockey.

Their revenue is $16 billion so the loss is only around 2% of revenue. However many of their costs such as depreciation and fuel can’t be reduced. They have 50 million passengers a year so to break even need to reduce the cost per passenger by at least $6.

Air NZ in 2012 made a $70 million profit on $4.5b revenue so close to a 2% profit on revenue. With 12 million passengers that is a profit of around $6 a passenger.

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30 Responses to “Qantas to shed 5,000 jobs”

  1. KiwiGreg (3,259 comments) says:

    Of course airlines don’t make profits from “average” passengers. To really understand what’s going on you’d need to do a proper route and class analysis. If they’re going to the government you can bet there are some “politically vital” but unprofitable routes they are maintaining so they can threaten to close them.

    Like Air NZ, Qantas should be allowed to stand or fall on its own commercial merits. But it wont.

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  2. eszett (2,426 comments) says:

    What an industry, where you consider a 2% profit margin something to celebrate!

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  3. burt (8,305 comments) says:

    Qantas needs Helen Clark as PM with an election about to happen …. Don’t worry Australians I wouldn’t sell your Qantas shares just yet ….

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  4. Billy (121 comments) says:

    The airline business seems like a very good one to be in. Let’s agree that the government will always own all of it so the taxpayer can cream all those tasty profits. If the government ever decides to sell even a little part of it, let’s all froth at the mouth and scream about theft.

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  5. NK (1,253 comments) says:

    The Australian correspondent on Newstalk ZB last night said that most of these problems have been caused by unions demanding out of control wages. These unions now face the prospect of thousands of job losses.

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  6. Mobile Michael (459 comments) says:

    Too many corporations can play this game. The Post Office gave Richard Prebble the list of surplus branches to close, starting in his electorate and spreading out. Guaranteed that QANTAS will propose cutting services to marginal areas like NT and Queensland to the Aussie Government unless it gets a subsidy.

    Prebs having more backbone than the current Parliament combined, signed off the closures. Will the coalition be as brave?

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  7. RRM (10,001 comments) says:

    I heard a rumour that Air NZ makes nothing from its domestic services, and operates those pretty much as a public service, any profit is made on international operations.

    No idea if it’s true, but it I heard it from someone who works there…

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  8. skyblue (212 comments) says:

    Make the fares higher for the routes that do not turn a profit. This is the cost of isolation.

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  9. smttc (761 comments) says:

    RRM, tried buying a ticket on Air NZ between Napier and Auckland particularly during early morning and late in the day (or any other route where Air NZ has a monopoly)? It’s fucking extortion.

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  10. Ben Dover (526 comments) says:

    Now what OZ needs is a bunch of whining Kiwis

    to ask for the Dole

    and Tweedle DUmb and Tweedle dee
    might as well work for centre link and social welfare

    That is what happens when you put a sniveler in charge of a National Carrier

    Hey maybe Australia should get them making cycle tracks for tourists
    that arrive on other Carriers?

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  11. labrator (1,850 comments) says:

    It’s fucking extortion.

    Must be ripe for competition then. Nobody has tried starting an airline to compete with AirNZ before. You should give it a go.

    I have no idea why anyone would want to be in a margin business with such big amounts of capital involved.

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  12. Simon (758 comments) says:

    Global wage arbitrage kicking in. Hubs should in Asia. Flight crew and operations are a much smaller cost from Asia.

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  13. KiwiGreg (3,259 comments) says:

    “Nobody has tried starting an airline to compete with AirNZ before.”

    Sarcasm, or really short memory?

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  14. Prince (109 comments) says:

    Expect headlines in coming months decrying Qantas for not paying any tax despite revenue of $16B.

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  15. peterwn (3,298 comments) says:

    After Ansett crashed a couple of Aussie journos produced a book blaming Air NZ for it – obviously written for what the average Aussie wanted to hear. Presumably they will now write another book blaming Air NZ for QANTAS’s woes.

    Incidentally I recently checked Wellington – Cairns fares. QANTAS and Air NZ quoted fares via Sydney and possibly Auckland. QANTAS beat the hide off Air NZ fares – I suspect that QANTAS are desperate to retain the bulk of Sydney – Cairns traffic and not let Virgin make inroads.

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  16. dime (10,094 comments) says:

    Strong unions have caused this.

    Everyone from pilots to engineers have pushed and pushed and now shes broke.

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  17. Huevon (223 comments) says:

    Man oh man is Tony Abbott taking it deep and hard in his first year of office. But he is a good man – he will come through and Australia will be much better off in a few years.

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  18. wreck1080 (3,956 comments) says:

    “The airline business seems like a very good one to be in.”

    Are you kidding?

    Airlines go broke all of the time.

    It is just a matter of time before Air NZ is in trouble.

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  19. PaulL (6,036 comments) says:

    A few people on this thread unable to notice sarcasm.

    Qantas have had substantial union problems, but that’s not all their problems. I find it somewhat amusing that they’re looking for a debt guarantee – so basically they have managed the company into the ground and nobody wants to lend them money, so they ask for a govt debt guarantee to fix it.

    I’d quite like the government to underwrite my mortgage, that’d reduce my interest costs. Any reason I shouldn’t be asking for that?

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  20. Gulag1917 (978 comments) says:

    Australian industries are overmanned, a whole army is required to do a simple job i.e. low productivity. Expect more massive layoffs.

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  21. OTGO (559 comments) says:

    Poor service by grumpy homosexual cabin staff makes Qantas and its subsidiaries my airline of last resort. They are not on the same planet as Air NZ which quite rightly wins airline of the year nearly every year.
    Something needs to change at Qantas. Maybe it’s time for a takeover?

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  22. gazzmaniac (2,307 comments) says:

    Having travelled extensively in Australia I can confirm that QANTAS have the worst service for economy passengers (even worse than their subsidiary Jetstar, where you get the service you pay for), and the highest fares. Maybe if QANTAS stopped being cunts to their regular customers then they would start to regain market share.
    Air NZ used to be like that until about four years ago. Funnily enough that is when they started making money again.

    QANTAS aren’t after more subsidies, first and foremost they want an amendment to the Qantas Sale Act to allow them to be majority foreign owned. Presumably they have a buyer with deep pockets lined up.

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  23. Adolf Fiinkensein (2,914 comments) says:

    I understand they can’t buy new aircraft because nobody will lend them the money as their bonds are junk rated. Mr Abbott should decline the request for a gummint guarantee and instead have the gummint buy the aircraft and onlease them to Qantas, thus ring fencing the potential commitment form taxpayers.

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  24. gazzmaniac (2,307 comments) says:

    Or QANTAS could lease planes from companies that lease planes instead of the government out of it.

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  25. Ed Snack (1,925 comments) says:

    Perhaps the major reason that nobody will risk starting a competitive service for (say) flights out of Napier is quite simple; the day that they start flights the price of Air New Zealand flights to the same destinations will drop by at least 50% to levels that are unprofitable. Those prices will continue for as long as it takes to drive the competitor out, then prices will go back to their normal highly profitable level. ANZ can afford to do this by cross subsidization from other revenues; the competitor, unless they also run a wide range of services, can’t.

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  26. burt (8,305 comments) says:

    If public ownership of airlines is such a good idea why don’t we (NZ government ) buy up chunks of Qantas ?

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  27. gazzmaniac (2,307 comments) says:

    smttc and Ed Snack
    I’ve flown and taken the bus to Napier, best fare I have got was $80 in the middle of the day. Given that I have to travel from Otaki to Wellington to catch the plane (~$12 on the train plus $8 on the airport bus) which takes an hour and a half, arrive at least half an hour early (but a bit earlier since I have to rely on public transport to get there, so say an hour), plus a 40 minute flight, the total time in transit is a bit over three hours.

    Compare that to the Naked Bus. I can get the Naked Bus from Otaki to Napier for $10 (amazing that the private enterprise can deliver a 300 km journey for only 25% more than a subsidised service charges for a 9 km trip across town, but that is another story). Total time in transit for that trip is about 3 1/2 to 4 hours, since buses travel slow and you have to go into Palmerston North to allow some passengers to change buses. Plus you get dropped in the middle of town, no need to find a way from the airport into town, and you can arrange to be dropped off at any town on the way. So for the sake of an hour or so and much less hassle you save $100. Not a bad hourly rate. I still prefer to drive mind you.

    My point is that nobody is going to set up a regional airline in New Zealand because the country is so small that the target customers will just drive or take the bus for a much lower price. The people who can afford to fly are either being paid by their business to fly, or don’t care about the cost.
    The exception being Cook Strait, which is serviced by the excellent Air2there, who cost the same as the ferry and get you to either Wellington or Paraparaumu, which is much more convenient.

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  28. DJP6-25 (1,389 comments) says:

    Huevon 9.29 am. Yes, it’s best to get through the hard stuff asap.

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  29. dirty harry (513 comments) says:

    Right on the button Ed Snack @11.23

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  30. RichardX (329 comments) says:

    It has been said that in over 100 years of airline operations across the entire industry, more money has been lost than profit made. It is hard to find evidence for this though
    The closest I can find is http://www.johnkay.com/2005/09/27/airlines-and-the-canine-features-of-unprofitable-industries

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