Qantas Outlines Plan to Combat Downturn

Qantas has revised its 2008/2009 full year profit before tax (PBT) outlook downwards from around $500 million to between $100 million and $200 million. The airline said the new profit forecast range is subject to no further changes in market conditions, fuel prices, and volatility in hedge accounting results.

Qantas Chief Executive Officer Alan Joyce said that Qantas Airlines' international services and Qantas Freight were bearing the brunt of the decline in economic conditions, with a lesser impact on Qantas domestic services, while Jetstar, the Qantas Frequent Flyer business and QantasLink were 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%", Mr Joyce said.

"We have no choice but to lower our profit forecast and make major changes to ensure Qantas can weather the current commercial environment.

"We have faced accelerated declines in passenger demand and revenue while market competition has intensified. Some competitors are reducing capacity, but overall market capacity into Australia has continued to grow despite falling demand."

Mr Joyce said that capacity cuts will be made to both the freight and passenger businesses, on international as well as domestic routes. The airline will also ground additional aircraft and defer some aircraft orders, as well as maintaining a freeze on further capital expenditure.

The following measures are to be implemented:

- A further 5% reduction in flying capacity, affecting frequency on Qantas Airlines international and domestic routes;

- Cuts to freight capacity, on both domestic and international routes;

- Grounding the equivalent of ten aircraft and making them available for sale;

- Deferring aircraft orders, including four Airbus A380s and twelve 737-800 aircraft;

- Exploring a number of options with Boeing about 787-800 aircraft including reducing, in the near-term, the number of aircraft to be delivered;

- Reducing capital expenditure by at least $800 million in 2009/2010, and;

- Removing an additional 500 management positions.

"Unfortunately, responding rapidly to declining economic conditions is going to have a direct
impact on our staff. We employ over 34,000 people and we are striving to protect as many of their jobs as possible, but the capacity reductions to protect the long-term viability of the overall Qantas Group mean that up to 1,250 equivalent full-time positions will be affected in addition to the management reductions being made," Mr Joyce added.

He said the company would try to use a range of workforce initiatives to manage the downturn such as, annual leave, long service leave, attrition, redeployment, leave without pay, promoting part-time work and job-sharing.

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