Qantas will axe 5000 jobs, ditch unprofitable routes and retire ageing gas-guzzling planes, in the biggest shake up of its operations since it was floated almost two decades ago.
It is the biggest cull of Qantas' staff since chief executive Alan Joyce took the reins in 2008. Before the latest retrenchments, Joyce had announced almost 4200 job cuts during his tenure.
The carrier also reported a A$252 million ($272 million) underlying loss in the first half amid a bitter fight with Virgin Australia in the domestic market, and intense competiton on international routes.
The result is in contrast to Air New Zealand's 29 per cent rise in interim profit before tax to a record $180m.
It is Qantas' biggest first-half loss since the Keating government began cuting it free from government ownership in 1995.
The job cuts from Qantas's 33,000-strong workforce will be across the board, and include reducing management and back office staffing levels by about 1500. The ariline will also cut back on its aircraft maintenance operations and catering.
Qantas will also ditch flying between Perth and Singapore later this year and retire six Boeing 747 jumbos. It will also reduce A380 flights between Melbourne and London in November to reduce the amount of time the planes stay on the ground at Heathrow Airport.
It has also deferred the delivery of the last eight A380 super jumbos it has on order, as well as the last three of 14 new 787 Dreamliners due for Jetstar. All of its Boeing 767s will be retired by the first quarter of 2014-15.
The airline will also shelve new growth plans for Jetstar in Asia amid intense competition with other budget airlines in the region.
Joyce said the airline "must take actions that are unprecedented in scope and depth to strengthen the core" of the business.
"We have already made tough decisions and nobody should doubt that there are more ahead," he said.
"To reach A$2 billion in cost cuts over three years, we have to work our assets harder, become more productive, retire older aircraft, and make sure that our fleet and network are the right size. We must defer growth and cut back where we can, so that we can invest where we need to."
The Australian Services Union says Qantas' decision to shed 5000 full time workers is short sighted.
ASU Assistant National Secretary Linda White says the decision is devastating for all workers at the company.
"It's outrageous that so many Qantas (and Jetstar) staff are going to bear the brunt of the poor business decisions made by Qantas in recent times," White said.
"Qantas have suggested they will seek to freeze wages until they achieve a full year underlying profit. This is an indefinite claim, and front line staff will have no influence over this outcome. It's punishing the workers for the poor business decisions made by Alan Joyce."
Qantas has also confirmed it has reached agreement to sell its long-term lease on its terminal at Brisbane Airport for A$112m. The lease was due to expire in 2018.
Under the arrangements with the airport, Qantas will retain exclusive use and operational control over much of the northen end of the terminal until the end of 2018 while ''securing rights to key infrastructure beyond this period''.
Unions had been bracing for massive cuts at the airline for weeks, which they have been expecting to include engineers and pilots among the redundancies.
Qantas has for years steered clear of making redundant its large workforce of pilots - including about 2600 who fly long-haul aircraft - preferring to allow them to take unpaid leave or seek time out to work for other airlines.
Qantas warned in December that it would post a pre-tax loss of between A$250m and A$300m in the first half, a period during which Australian typically make the lion's share of their earnings.
Joyce has been under pressure from from investors to reveal a credible way of A$2 billion in costs from the airline over the next three years.
The job cuts come at the same time the federal government prepares to provide Qantas with a debt guarantee, meaning taxpayers would foot the bill should the airline default.
But Australia's largest regional airline on Wednesday launched a scathing attack on Qantas' attempts to have the Abbott government stand behind its debt.
Regional Express deputy chairman John Sharp said the move would distort the industry.
''If the Australian government backs Qantas, Qantas will then be a government-backed airline, and so Rex will be confronted with two government-backed airline operations that we will be competing with, and that I think is unfair, that I think is a significant distortion of the marketplace,'' he said.
The Abbott government has also made clear it will attempt to relax regulations that guard the airline against majority foreign ownership. However, the government will struggle to steer change to the Sale Act through either the present Senate dominated by Labor and the Greens or the next one that will sit from July 1.
- Sydney Morning Herald