QANTAS will axe up to 1750 jobs and ground 10 planes

QANTAS will axe up to 1750 jobs and ground 10 planes as it battles an economic downturn that has sent it plunging into the red.

Less than five months after taking over as Qantas chief executive, Alan Joyce revealed today the company would miss its full-year profit forecast by an extraordinary 60-80 per cent.

Its target of a $500 million profit before tax for the 2008-09 year has been slashed to between $100 million and $200 million. Given its profit of $288 million for the first six months of the year, this suggests the national flag carrier will report a loss for the second half.

The news sent Qantas shares crashing 20c, more than 10 per cent, to $1.76. Qantas shares hit a record low of $1.42 on March 9.

The new profit target includes $150 million in provisions for writing down the value of planes and restructuring costs, which will include redundancy payments. But Qantas warned the new forecast assumed “no further changes in market conditions, fuel prices”.

“Market conditions have deteriorated, especially in our international business,” Mr Joyce said.

He said Jetstar, the Qantas Frequent Flyer business and QantasLink were continuing to perform well. But Qantas was experiencing significantly lower demand, particularly in premium classes, and it faced considerable price pressures, with extensive sales and discounting by all carriers, in some cases leading to fare cuts of up to 50 per cent.

“We have no choice but to lower our profit forecast and make major changes to ensure Qantas can weather the current commercial environment,” he said.

Mr Joyce, who has moved to stamp his authority on the airline since taking over from the long-serving Geoff Dixon in November, said responding rapidly to declining economic conditions would “unfortunately” have a direct effect on Qantas staff.

Qantas said it would shed an extra 500 management positions, with up to 1250 other staff across the airline to lose their jobs.

The job losses, on top of 90 management positions announced last month, mean Qantas is cutting as many jobs as the national clothing retailer Pacific Brands. Pacific Brands drew national condemnation last month when it revealed plans to axe 1850 jobs and shift key parts of its production overseas.

“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 1250 equivalent full-time positions will be affected in addition to the management reductions being made,” Mr Joyce said.

Deputy Prime Minister Julia Gillard today decribed the job cuts as “very unwelcome news” but said it stood to reason that a global recession would hit international travel.

“It's going to be very distressing for those Qantas workers who are shortly to be told they are to be made redundant and those Qantas workers who are asked other potentials to try and avoid redundancy. It's a very difficult time for them.”

Ms Gillard said the Government had made it clear that Australia would not be immune from the effects of the global recession. But Labor had done what it could to cushion the nation from the worst effects through the economic stimulus packages. “Clearly it would be worse if we hadn't acted decisively to support economic activity and to support jobs,” she said.

Ms Gillard said Qantas had vowed to do what it could to preserve jobs and avoid further redundancies, including the use of leave and job sharing. “Qantas is saying ... they will work their way through every option, with the redundancies only as a last resort,” she said in Canberra.

She called on all employers to take an innovative approach to retaining staff in tough times.

The latest cuts came on top of the 1500 job cuts announced by the airline in July last year.

Mr Joyce said Qantas wanted to avoid redundancies, so it 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 exploring job-sharing. But jobs losses would be inevitable.

The airline also said it would cut capital expenditure by at least $800 million in 2009-10, defer aircraft orders, including four superjumbo Airbus A380s and 12 Boeing 737-800 aircraft and reduce capacity by a further five per cent. The capacity cuts, which will focus on reducing the frequency of flights rather than axing routes, would ground the equivalent of 10 planes and make them available for sale.

The cuts are likely to focus on Australian domestic routes and international flights to the US, Britain