Qantas cuts 1000 jobs, mulls future of Jetstar and frequent flyers

  bevans Site Admin

Location: Melbourne, Australia
Qantas will axe at least 1000 jobs over the next year and warned that it will slump to a loss of up to $300 million in the first half, blaming a market deterioration in trading conditions and weaker return on fares.
In a dramatic response to its rapidly deteriorating financial position, the airline will consider the possibility of partial sales of businesses including Jetstar Australia and its frequent flyer loyalty program.
"We cannot and we will not stand still": Qantas chief Alan Joyce says the airline has no choice but to cut jobs. Photo: Getty Images

It said "all options are on the table" as part of a wide-ranging structural review. The airline would not name the most likely options but possible courses of action include sell-downs of its investments in Asia. They include Jetstar Asia in Singapore and Jetstar Japan.

Qantas shares slumped 16 per cent to $1.02 - just shy of an all-time low of 96 cents reached last year following the earnings warning. Its shares closed at $1.07, down 11 per cent.

It will be the first time the airline has recorded a loss in the first half since it was privatised in the 1990s.
After pleading over the last two weeks for financial assistance from the federal government, Qantas said in a profit warning on Thursday that the ''challenges we now face are immense''.

The airline will step up cost savings over the next three years, stripping out $2 billion.

The cutting of at least 1000 jobs over the next year will include 300 roles that Qantas announced last month would be axed following the closure of its heavy maintenance base at Avalon, near Geelong.

Qantas said it now expects to report an underlying loss before tax of between $250 million and $300 million for the six months to December 31. The first half is typically the airline's strongest.

Australia's largest airline said it expected yields – or return on fares – across the group to be 3.5 per cent lower in the first half compared with the same period last year.

The profit warning was triggered by a significant deterioration in yields and passenger loads on planes across its international and domestic networks in November.

Qantas chief executive Alan Joyce said the circumstances demanded urgent action.

''The challenges we now face are immense – but we will overcome them and we will continue to build a stronger and better Qantas for Australia,'' he said in a statement.

Renewing his attack on his arch rival, Mr Joyce also said there had been ''unprecedented distortion of the Australian domestic market with Virgin Australia's strategy to seek major ownership and massive financial backing from government-owned airlines''.
''We cannot and we will not stand still in these extraordinary circumstances.''

Qantas has been aggressively lobbying the government to provide financial assistance which could include a debt guarantee or the purchase of a small stake.

Independent Senator Nick Xenophon called for Mr Joyce and the entire Qantas board to be sacked, saying that management had moved costs around the business in order to make the local operation appear as though it was performing worse than it actually was.

Mr Joyce said the structural review was running separately to its ongoing talks with the government. He informed the Treasurer Joe Hockey and Transport Minister Warren Truss of the structural review and profit warning shortly after it informed the market this morning.

He also defended his own position when asked about the significant fall in Qantas's share price since he began as chief executive five years ago.

"The board have been very supportive on this. The board understands the dynamics in the marketplace," Mr Joyce said.
"Qantas has an amazing management team."

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  raymond Deputy Commissioner

Location: Gladstone, Queensland
Mr Joyce,a little Irish joke?    

  bevans Site Admin

Location: Melbourne, Australia
[quote=raymond]Mr Joyce,a little Irish joke?

sure is now!

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]Qantas has been downgraded to junk status just a day after the airline announced the axing of 1000 jobs and and warning it could fall to a $300 million loss in the first half of this year.[/font][/size][/color]

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]The airline had entered a trading halt ahead of the announcement that it lost its investment grade credit rating from Standard & Poor’s, which downgraded the company to a "BB+/B" rating.[/font][/size][/color]

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]The shares opened lower at $1.03 when they resumed trading on Friday afternoon. At 12.59 pm AEDT, they fell 1.4 per cent to $1.055.[/font][/size][/color]

[center][color=#000000][size=1][font=Arial, Helvetica, sans-serif][img][/img][left][color=#666666][size=1][font=Arial, Helvetica, sans-serif]In freefall: Qantas shares have fallen more than 80 per cent since 2007. [i]Photo: Joe Armao[/i][/font][/size][/color][/left]

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]Qantas chief financial officer Gareth Evans said the downgrade was “not unexpected” following the airline’s update to the market on Thursday.[/font][/size][/color]
[color=#000000][size=1][font=Arial, Helvetica, sans-serif]“It highlights the unprecedented pressures that the Qantas Group is facing from several external forces but particularly from an uneven playing field in the Australian aviation market,” he said.[/font][/size][/color]

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]“The Qantas Group retains a strong financial position, including a large cash balance and a significant asset base.”[/font][/size][/color]

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]He said the airline was continuing discussions with government about the uneven playing field in the local aviation sector and would provide an update on its structural review in February. Following the review, Qantas could decide to sell stakes in assets such as its frequent flyer program or Jetstar.[/font][/size][/color]
[color=#000000][size=1][font=Arial, Helvetica, sans-serif]Mr Evans did not detail the consequences of the loss of an investment grade credit rating.[/font][/size][/color]

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]On Thursday, Qantas shares plunged 11.2 per cent, their biggest one-day loss in almost 18 months, to $1.07 after the airline announced it would lose up to $300 million in the first half of the financial year.[/font][/size][/color]
[color=#000000][size=1][font=Arial, Helvetica, sans-serif]S&P had rated Qantas at BBB-minus - the lowest investment-grade credit rating - but had not placed it on negative watch for a potential downgrade.[/font][/size][/color]
[color=#000000][size=1][font=Arial, Helvetica, sans-serif]The downgrade means Qantas could face the prospect of losing hundreds of millions of its $2.8 billion cash balance, as the transfer of revenue from credit card companies for transactions such as ticket sales is delayed because of the lower rating.[/font][/size][/color]

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]The airline could also face a $100 million-plus rise in its annual interest bill, higher leasing and hedging fees and the loss of some investors unable to invest in companies rated “junk”.[/font][/size][/color]

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]Moody’s on Thursday evening placed Qantas on negative watch but maintained its Baa3 rating - the lowest investment grade - for the time being.[/font][/size][/color]
[color=#000000][size=1][font=Arial, Helvetica, sans-serif]Qantas chief executive Alan Joyce on Thursday would not reaffirm that the airline would keep its investment-grade credit rating, saying that was up to the ratings agencies.[/font][/size][/color]

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]Qantas has been placing increasing pressure on Tony Abbott’s government to guarantee the airline’s debt, but so far the Coalition has held back.[/font][/size][/color]
[color=#000000][size=1][font=Arial, Helvetica, sans-serif]‘‘Moody's has stated government support would be credit positive for Qantas. Government commentary reported in the media appears to suggest taking a 5-10 per cent ownership stake in Qantas is currently the preferred option over an explicit government guarantee or letters of comfort,’’ said UBS analyst Simon Mitchell.[/font][/size][/color]

[color=#000000][size=1][font=Arial, Helvetica, sans-serif]It has been a rough six years for Qantas investors, who have seen the company’s share price fall more than 80 per cent from $6.06 in 2007.[/font][/size][/color]
[color=#000000][size=1][font=Arial, Helvetica, sans-serif]Ratings agencies like S&P rate organisations as a credit risk using a system that starts at AAA for the likes of the Australian government. The lowest S&P "investment grade" rating is BBB+.The BB+/B rating given to Qantas is one notch lower, meaning its rating is "junk" or sub-investment grade.[/font][/size][/color]
[color=#000000][size=1][font=Arial, Helvetica, sans-serif]- with Max Mason[/font][/size][/color]

Read more: [url=][color=#003399][font=Arial, Helvetica, sans-serif][/font][/color][/url]
  don_dunstan Dr Beeching

Location: Adelaide proud
I can't believe Tony Abbott is seriously considering shoving money into Qantas - it's just a brand name like any other airline.

If they can support Qantas then why not Fairfax?
  9034 Train Controller

I can't believe Tony Abbott is seriously considering shoving money into Qantas - it's just a brand name like any other airline.

If they can support Qantas then why not Fairfax?

Taxpayer's already support a left wing media outlet.   It's called the ABC.  Why should they (the Taxpayer)  support another one?

  don_dunstan Dr Beeching

Location: Adelaide proud
Taxpayer's already support a left wing media outlet.   It's called the ABC.  Why should they (the Taxpayer)  support another one?

Why not, if they bought into it they could stack the board with people like Janet Albrechtsen and Michael Kroger.  It makes more sense to me than trying to prop up an ailing airline.
  xxxxlbear Token Booking Clerk

Location: Geelong
Seems our aussie airlines are forming the habit of being screwed up by foreign bossess. The precedent was set with Ansetts CEO Conrad Black, and now our little irish battler, Mr. Joyce, head of Qantas.
  gravesend_king Station Master

I wonder if the Chief Financial Officer Gareth Evans is the former Labor politician. No wonder the airline is losing money>

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