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.
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
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
- 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
- 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
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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