Qantas is cutting some 6,000 jobs, about one fifth of its total workforce, as it faces years of depressed demand.
Laying out its three-year strategy today, the airline said it is aiming to reduce costs by AUS$15 billion and that job losses and “extended stand downs” would be necessary to “manage a long period of reduced flying (especially internationally).”
Qantas says that it will ground “around 100 aircraft… for up to 12 months; some for longer”.
There is also an equity raising of up to $1.9 billion.
Qantas said “Covid represents the biggest challenge ever faced by global aviation and the Group’s response to the crisis is scaled accordingly. This unfortunately means a large number of job losses across Qantas and Jetstar.”
Key actions of the plan include:
- Reducing the Group’s pre-crisis workforce by at least 6,000 roles across all parts of the business.
- Continuing the stand down for 15,000 employees, particularly those associated with international operations, until flying returns.
- Retiring Qantas’ six remaining 747s immediately, six months ahead of schedule.
- Grounding up to 100 aircraft for up to 12 months (some for longer), including most of the international fleet. The majority are expected to ultimately go back in to service but some leased aircraft may be returned as they fall due.
- A321neo and 787-9 fleet deliveries have been deferred to meet the Group’s requirements.
- The cost of implementing the plan is estimated at $1 billion, with most of this realised during FY21
Announcing the plan Qantas Group CEO Alan Joyce said: “The Qantas Group entered this crisis in a better position than most airlines and we have some of the best prospects for recovery, especially in the domestic market, but it will take years before international flying returns to what it was.
“We have to position ourselves for several years where revenue will be much lower. And that means becoming a smaller airline in the short term.
“Most airlines will have to restructure in order to survive, which also means they’ll come through this leaner and more competitive. For all these reasons, we have to take action now.
“Adapting to this new reality means some very painful decisions. The job losses we’re announcing today are confronting. So is the fact thousands more of our people on stand down will face a long interruption to their airline careers until this work returns.
“What makes this even harder is that right before this crisis hit, we were actively recruiting pilots, cabin crew and ground staff. We’re now facing a sudden reversal of fortune that is no one’s fault, but is very hard to accept.
“This crisis has left us no choice but we’re committed to providing those affected with as much support as we can. That includes preserving as many jobs as possible through stand downs, offering voluntary rather than compulsory redundancies where possible, and providing large severance payouts for long serving employees in particular.
“As we’ve done throughout this crisis, our decisions are based on the facts we have now and the road we see in front of us. Our plan gives us flexibility under a range of scenarios, including a faster rebound or a slower recovery.
“Despite the hard choices we’re making today, we’re fundamentally optimistic about the future. Almost two-thirds of our pre-crisis earnings came from the domestic market, which is likely to recover fastest – particularly as state borders prepare to open. We have the leading full service and low fares airlines in Australia, where distance makes air travel essential, and diversified earnings through Qantas Loyalty.
“We still have big ambitions for long haul international flights, which will have even more potential on the other side of this.
“As a business, recapitalising means we can get ready sooner for new opportunities, returning to profit and building long term shareholder value. As the national carrier, we remain committed to supporting tourism, connecting regional communities and safely flying millions of people every year.”
“Of the Group’s 29,000 people, around 8,000 are expected to have returned to work by the end of July this year. It’s anticipated that this will increase to around 15,000 by the end of calendar year 2020 in line with the opening up of domestic flying, and increase further during calendar 2021 and 2022 as the international network returns, reaching 21,000 active employees by June 2022.
“Redundancies are proposed to manage a surplus of around 6,000 roles, with the temporary surplus of around 15,000 managed through a mix of stand down, annual leave and leave without pay.
Stand-ups will increase as travel restrictions lift and flying returns. This allows the Group to preserve as many jobs as possible for the longer term and respond faster if recovery timelines improve.
In line with its obligations, the Group will consult with relevant unions on the proposed job losses announced today. These span the following areas of Qantas and Jetstar:
Non-operational – at least 1,450 job losses, mainly in corporate roles, due to less flying activity.
Ground operations – at least 1,500 job losses across airports, baggage handling, fleet presentation and ramp operations due to less flying activity.
Cabin crew – at least 1,050 job losses due to early retirement of the 747s and less flying activity. A further 6,900 cabin crew will be on stand down from July 2020 onwards.
Engineering – at least 630 job losses due to 747 retirement, less flying activity (particularly of the wide-body fleet) and redistribution of work from Jetstar’s Newcastle base to make better use of existing maintenance capacity in Melbourne.
Pilots – at least 220 job losses mostly due to early retirement of the 747s. A further 2,900 pilots will be on stand down from July 2020 onward.
Additional reduction in total roles will result from contractors, particularly in corporate areas such as IT, not returning.
Qantas also says that “There is significant uncertainty as to when flying levels will support its 12 Airbus A380s. These assets will be idle for the foreseeable future, which represents a significant percentage of their remaining useful life.”