Qantas to scrap planes, jobs as fuel costs bite

Jetstar will cut three daily domestic flights to Christchurch from April in response to reduced demand from the earthquake hit city.

The Qantas-owned budget airline will also axe one Melbourne to Christchurch daily service.

The schedule reductions are part of a raft of cost cutting measures announced by Qantas today in response to rising fuel prices and natural disasters including the Japan earthquake and tsunami, as well as floods and cyclone Yasi in Australia.

Qantas said the Christchurch earthquake was estimated to cost the airline A$15 million.

Chief executive Alan Joyce said: "There has never been a time when the world faced so many natural disasters, all of which have come at a significant financial cost to the Qantas Group".

The airline had to act decisively to ensure the ongoing sustainability of the business, Mr Joyce said.

Jet fuel prices have risen from about US$88 a barrel in September last year to more than US$131 a barrel today, adding A$2 billion to Qantas' fuel costs in the second half of the 2011 financial year.

Qantas increased fares and fuel surcharges in February and earlier this month to help cover some of the fuel cost increases.

It is still sticking to its previous guidance that pre-tax profits for this financial year will be ''materially stronger than'' last year when it posted A$377 million in underlying earnings.

The airline also indicated that the natural disasters would impact its earnings next financial year, but said in a statement to the ASX this morning that it was too early to put a figure on it.

Qantas said it would ''reduce management headcount'' but did not disclose the number of jobs to be axed. It would also act to reduce its workforce's annual and long-service leave balances.

In other measures, Jetstar will suspend up to four return flights a week between Australia and Japan due to the impact on demand of the tsunami and nuclear disaster in the Asian nation.

Qantas will downsize its aircraft flying to Tokyo from Boeing 747 aircraft to Airbus A330s, and suspend services between Perth and Tokyo from May 8. The airline will also retire two Boeing 767 aircraft earlier than it had anticipated.

BusinessDay