New cost cuts for Qantas
Fri "Courier Mail"
New cost cuts for Qantas
Geoff Easdown
25jul03
QANTAS staff were last night warned to expect a new round of savage cost-cutting to shore up the future of the nation's flag carrier.
The move is almost certain to result in further cutbacks.
They will follow the 1500 redundancies the carrier announced three months ago to overcome the economic crisis confronting world airlines.
Managing director Geoff Dixon said Qantas would trim $1 billion off capital expenditure during 2003-04, and operational costs would be cut by a further $1 billion over the next two years years.
The carrier's 35,000 workers and their unions would have to understand that Qantas had to introduce more efficient work and rostering practices, Mr Dixon said.
Work, presently done in-house, would be contracted out.
More fixed term and casual employees would also find jobs with the airline, he signalled.
Announcing the new measures in Perth, Mr Dixon said: "We either make the changes and make them quickly or face the prospect of shrinking market share and loss of jobs."
And he added: "I do not want to underestimate or trivialise the impact that change will have on our employees, or the challenges that this poses for unions."
Mr Dixon's strong words about how Qantas would operate in the new era of tightened airline budgets were also directed at the Howard Government and the existing restriction on injections of foreign capital.
"The notion that Qantas operates in a competition-free world and will remain unaffected by severe regulatory penalties like limitations on access to foreign equity capital is just plain wrong," said Mr Dixon.
"Similarly, any feeling that Qantas should continue to operate in an inflexible and old-fashioned way, commensurate with its icon status, is misguided and dangerous."
He said that unlike its competitors Qantas did not have access to bankruptcy protection, government ownership shelters or the luxury of no-frills flexible operating arrangements.
Mr Dixon said that "some people think Qantas is impregnable, and will survive no matter what".
"This simply is not true," he said, adding that the airline had to address challenges and ensure it had a sustainable future.
Qantas, like all other international airlines, suffered a severe cutback in passengers because of the war in Iraq and from the outbreak of severe acute respiratory syndrome in its prime markets in Asia.
The passenger falloff, down 6.1 per cent in May to 69.8 per cent, is expected to result in a second-half loss when the carrier's annual results emerge next month.
Mr Dixon said it needed to be understood that almost 30 per cent of Qantas's total costs were labour costs.
Qantas shares fell 2 per cent or 7¢ to $3.12 yesterday.
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AAP
Qantas in vulnerable position: analyst
Australia's flagship airline Qantas Airways Ltd is in a vulnerable position at present, a major broking house said.
Merrill Lynch warned in a report that the airline was facing increased competition for its core franchise markets.
"Qantas is arguably facing its biggest challenge in recent history," the report stated.
Merrill Lynch warned that Virgin Blue "has been relentlessly winning market share" and could become a full-service product "if not stopped now".
Competition was also likely to increase on Qantas' international routes.
"Equally, incumbent international airlines are facing their greatest historical challenge while others are looking to rapidly build a global network," the report said.
The broking group added that, while it believed Qantas could respond to the heightened competition, the issues posed significant risks to investors, therefore it retained a neutral recommendation on the stock.
Merrill Lynch said the airline would have to immediately lower operating costs by 10-15 per cent in order to compete on costs and regain leadership in its key markets.
"We believe a cost cut of this magnitude is possible by aggressively re-engineering both its labour practices and its fleet configuration," it said.
Earlier this week, Qantas said international traffic, measured in revenue passenger kilometres (RPK), slumped by 18.7 per cent in May compared to the same time last year.
The number of international passengers fell 18.5 per cent to 530,000 while domestic patronage rose half a per cent to 1.3 million.
Total passenger numbers fell 6.2 per cent to 2.1 million, from 2.3 million in May 2002.
However, for the 11 months to the end of May 2003, the airline's total passenger numbers were 26.7 million, up seven per cent on the same period for the 2001/02 fiscal year.
Qantas shares closed down seven cents at $3.12.
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