Qantas to shed up to 2,000 jobs


Qantas CEO Geoff Dixon blames the job cuts on the global aviation downturn

By CNN's Geoff Hiscock
Asia Business Editor

SYDNEY, Australia (CNN) -- Qantas Airways, Australia's biggest airline, has shown it is not immune to the global aviation downturn, announcing Thursday it will cut up to 2,000 jobs by the end of December.

The move prompted a sharp response from union leaders, who said the cuts came at a time of record passenger numbers for Qantas.

Some Qantas workers walked out at Melbourne Airport.

But Qantas said the move was a result of the "sharp and continuing deterioration" in the international market.

Qantas also signalled an increased emphasis on its domestic market, where it now has an 85 percent share following the collapse of its rival Ansett Airlines in September.

It said it would end New York flights from November 25 and reduce services to Bangkok, Manila, Buenos Aires, Johannesburg and Rome.

International capacity down 11 percent

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Qantas Chief Executive Geoff Dixon said this would take the cuts in its international capacity to 11 percent since the September 11 terror attacks in the U.S.

Dixon noted that the aviation industry had shed 250,000 jobs in the past eight weeks, and said the downsizing by Qantas was "considerably less" than for other international airlines.

He said Qantas would keep compulsory redundancies to a minimum, by using job sharing, attrition and a hiring freeze.

The Australian airline is owned 25 percent by British Airways and is one of the most profitable carriers in the region, along with Singapore Airlines and Cathay Pacific.

It has benefited from the recent turmoil in Australia and New Zealand, where Air New Zealand and its subsidiary Ansett ran up huge losses during 2001 because of delays to a fleet renewal plan, leading to rising maintenance costs and safety issues.

New Zealand forced to rescue flag-carrier

As industry conditions worsened and Ansett's collapse in September began dragging down its parent company, the New Zealand government was forced to rescue Air NZ in October with an injection of up to $360 million.

In contrast, Qantas has been able to move ahead with a fleet upgrade.

Last month it said it would spend $765 million (Aust. $1.5 billion) to buy 17 new aircraft, including 15 Boeing 737-800 jets, and raised $230 million (A$450 million) in fresh equity to help pay for the planes.

It also entered into a 10-year strategic alliance with American Airlines under which it will start flying to Dallas late next year.

Dixon said Thursday that while Qantas was benefiting from its larger domestic share, the airline was still principally an international carrier. Last year, 78 percent of its profits were generated by the international operations.

Qantas shares were unchanged at A$3.94 in afternoon trading, close to the year's high of A$4.04 reached on November 2.

Ansett deal still faces hurdles

Administrators to Ansett Airlines, meanwhile, are still trying to bed down a conditional deal with Australian business tycoons Lindsay Fox and Solomon Lew to take over a slimmed down version of the airline in a deal worth about $1.8 billion (A$3.6 billion).

Part of the deal includes Ansett getting 29 new Airbus A320 aircraft under a $1.27 billion (A$2.5 billion) leasing arrangement.

The deal, scheduled to be completed by the end of January, needs approval of creditors and the Federal Court of Australia. More importantly, it is dependent on special assistance from the Australian federal government and the Victorian state government.

There is no commitment yet from the administration of Prime Minister John Howard, who was returned for a third term of office in national elections last weekend.