Substantial Capacity and Route Cuts at Qantas

The Qantas Group has responded to the continuing high fuel prices by announcing a range of cost saving measures including the cancellation of 5% of Available Seat Kilometres (ASKs) - the equivalent of grounding six aircraft.

Qantas' fuel bill is expected to increase by more than $2 billion in 2008/09, representing around 35% of the company's total expenditure.

"The fact is that fuel prices are something we have no control over, so we have to look harder at areas where we do have control," the Chief Executive Officer of Qantas, Mr Geoff Dixon said. "Despite our fuel hedging strategy, fuel surcharges, two separate across-the-board fare increases and a recruitment freeze, we are not bridging the widening gap between the actual increase in the cost of fuel and the amount we offset."

The Qantas Group is to manage its reduction in ASKs by:

- retiring one Boeing 737 aircraft;
- grounding two Boeing 767 aircraft and one Jetstar A320 aircraft; 
- cancelling the delivery of one Jetstar A321 aircraft; 
- accelerating the retirement of its four Boeing 747-300 aircraft, currently operating trans-continental services to Perth, by December; and 
- adjusting the flying patterns of other aircraft, including reducing the utilisation of the Boeing 747-400 fleet.

"This will enable us to make significant changes to domestic and international flying for both Qantas and Jetstar. In some cases, this will involve pulling off routes entirely. In other cases, we will scale back frequencies and capacity," said Mr Dixon.

In the domestic market:

- Qantas will exit its Gold Coast-Sydney and Ayers Rock-Melbourne routes and reduce Ayers Rock-Sydney services from August; 
- Jetstar will exit its Sydney-Whitsunday Coast, Adelaide-Sunshine Coast, and Brisbane-Hobart routes from July; and
-  Jetstar will reduce services on some Adelaide, Avalon and Cairns routes by August.

Qantas is now finalising details of its international network restructure, including capacity adjustments and market exits, and is expected to announce these next week.

The magnitude of the changes are expected to require a reduction in staff numbers.

"This week we will launch an accelerated leave program to mitigate the requirement for redundancies, but it is inevitable that a reduction in staff numbers will be necessary in selected parts of our business," Mr Dixon said. "As always, we will communicate with our people. In the first instance, redundancies will be carried out on a voluntary basis."

In addition to the above:

- the pay for all of the company's senior executive group will be frozen; and
- the normal July pay review for the remaining 1,000 executives would be deferred.

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