Australia's Qantas cuts 5,000 jobs, sheds aircraft after hefty loss
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[February 27, 2014]
By Jane Wardell and Lincoln Feast
SYDNEY (Reuters) - Australian carrier
Qantas Airways Ltd <QAN.AX> plans to cut 15 percent of its
workforce, sell older jets and reduce capital spending after
reporting a first-half loss amid growing competition in both
international and domestic operations.
The deep cuts are part of Qantas' plans to slash costs by A$2
billion ($1.8 billion) over the next three years - a bid by the
airline to convince the federal government and investors it is
worthy of the state assistance it says it needs.
Qantas, known as the 'Flying Kangaroo', is seeking a government debt
guarantee to give it access to cheaper capital. Battered by high
fuel costs and a strong Australian dollar, its credit rating was
relegated to junk status last year amid a price war with arch-rival
Virgin Australia Holdings <VAH.AX>.
Shares in Qantas, down a quarter over the past year, fell 7 percent
after the Sydney stock market opened. "For us the composition is
worse than expected, the leakage out of the international business
is really surprising and we think that Qantas will find it very hard
to articulate how it plans to stop this," said Peter Esho, chief
market analyst at Invast Financial Services.
The underlying loss before tax of A$252 million ($226 million) was
in line with the A$250 million to A$300 million loss the airline
warned last month it would report for the six months ended December
31. In the same period a year earlier, Qantas made a profit of A$220
"It's clear that the market Qantas operates in has changed, with
structural economic shifts exacerbated by an uneven playing field in
Australian aviation policy," Chief Executive Alan Joyce said in a
Qantas claims Virgin's access to foreign funding, via its major
shareholders Gulf carrier Etihad, Singapore Airlines <SIAL.SI> and
Air New Zealand <AIR.NZ>, has put Virgin at an advantage.
Of the 5,000 jobs to go, 1,500 were management and non-operational
roles, the airline said.
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Joyce said Qantas would defer receipt of the final three Boeing <BA.N>
787 Dreamliner jets it ordered for budget arm Jetstar, as well as
the eight remaining Airbus <AIR.PA> A380s it has on order. The moves
are part of a plan to either defer or sell a total of 50 aircraft.
The airline also said it has agreed to sell a lease it owns at
Brisbane airport, raising A$112 million in cash.
Prime Minister Tony Abbott said earlier this week it was in
Australia's interests for Qantas to "survive and to flourish" as a
major employer for the country.
"This government will do what it can to give it a level playing
field," Abbott said in parliament, adding that the airline needed
"to put its own house in order".
The government is drafting changes to the Qantas Sale Act to lift
the current 49 percent foreign ownership limit as well as alter
restrictions on smaller shareholdings for foreign airlines. ($1 =
1.1159 Australian dollars)
(Reporting by Jane Wardell and Lincoln
Feast; Editing by Kenneth Maxwell)
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