Air New Zealand’s major rival Qantas has taken drastic action to cut costs as it slashed its full year pre-tax outlook from $A500 million to between $A100 million and $A200 million.
To deal with reduced demand and passenger load factor, the airline is cutting flying capacity by 5%, which the airline estimates will affect the equivalent of 1250 jobs.
However, Qantas chief executive Alan Joyce says the company will work to minimise redundancies through the use of attrition, switching workers from full time to part time, job sharing, and employees taking annual and long service leave.
The airline will also be laying off another 500 managers, after giving 90 management jobs the chop in March.
It aims to reduce capital expenditure by $A800 million in 2009/2010, and will ground the equivalent of ten aircraft and make them available for sale, as well as deferring aircraft orders.
Mr Joyce says the airline’s international services and freight are bearing the brunt of the decline in economic conditions, while low-cost operator Jetstar, the Qantas Frequent Flyer Business and QantasLink are continuing to perform well.
“Market conditions have deteriorated, especially in our international business. We are experiencing significantly lower demand, particularly in premium classes, and considerable price pressures with extensive sales and discounting by all carriers –in some cases leading to fare reductions of up to 50%”, he says.
“We have no choice but to lower our profit forecast and make major changes to ensure Qantas can weather the current commercial environment.
“This means moving immediately to reduce capacity in those areas of our business facing the greatest impact of market deterioration, but we will not be withdrawing from routes to achieve this.”
The Qantas announcement of job losses is more bad news for Australian Deputy Prime Minister and Minister for Employment and Workplace Relations Julia Gillard, who last week had to absorb the news Australia’s unemployment rate had jumped from 5.2% to 5.7% in a month.
She says the job cuts are “unwelcome” news, and says it would be very distressing for Qantas workers affected.
Ms Gillard has also taken the opportunity to defend her government’s controversial stimulus packages, saying they had cushioned the nation from the worst of the recession.
“Clearly it would be worse if we hadn’t acted decisively to support economic activity and to support jobs.”