Have to agree with the Aus crew after reading this
Oil slick
By PETER GOSNELL
September 09, 2005
FOUNTAINING oil prices threaten to strip earnings margins at Qantas to the bone.
It's an outcome that will almost certainly impel chief executive Geoff Dixon to take the axe to staff as he thinks about earning another pay rise.
Last year, Mr Dixon's pay rose 3 per cent to $3.7 million.
As Australia's biggest airline released its annual report yesterday, it said higher fuel prices will have a "substantial" impact on the company and lead to lower earnings in 2006.
Qantas is cutting costs and lifting fare surcharges to limit the impact on earnings of a $1.25 billion rise in fuel costs this year, chairwoman Margaret Jackson said in Sydney-based Qantas' annual report.
"The extraordinary cost of fuel will have a substantial ongoing impact on the company," Ms Jackson said.
"Qantas does not expect to achieve the same levels of profitability in the current financial year."
Qantas raised its fuel surcharge a fourth time last month, with each domestic fare loaded with an extra $26 and international fares an extra $75 each for tickets sold after September 2.
"Fuel surcharges will contribute to partially offset this increase," she said. "However, we still face a $650 million shortfall at current prices compared to last year."
The chairwoman's warning came as Qantas said Mr Dixon had picked up a 3 per cent pay rise for the 2004-05 financial year, taking his total remuneration to $3.7 million.
Mr Dixon, 65, received $1.9 million in salary, the rest as bonuses and other benefits.
Last month he reported a 5 per cent gain in second-half net profit, reflecting cost cuts and the airline's hedging against fuel prices, which helped avoid losses incurred by rivals like Thai Airways.
Cathay Pacific, Asia's second most profitable carrier, incurred a drop in first-half net profit, blamed on soaring fuel costs.
Virgin Blue, Qantas' only domestic rival, has cut its forecast, citing fuel costs and competition.
Mr Dixon cut 15 per cent of Qantas management jobs last month.
He also plans to jettison 60 Sydney-based maintenance workers to help Qantas find $3 billion in cost savings by 2007-08.
Qantas shares put on another 4c to $3.27 yesterday