Australian airline Qantas said on Monday it is eliminating 500 jobs by merging maintenance facilities to save up to AUD$100 million (USD$98.4 million) annually, as high fuel costs and weak demand take a toll on airline profits.
Qantas, which is emerging from a costly industrial dispute, said in a statement it will stop heavy maintenance at Tullamarine in Melbourne and concentrate on Brisbane and Avalon, resulting in the job cuts. It had, in February, flagged another 500 job cuts for the group.
The latest move will save it AUD$70 million to AUD$100 million a year but will result in one-off costs of AUD$50 million, and takes estimated costs of an overhaul plan for the second half of fiscal 2012 to between AUD$250 million and AUD$260 million, it said.
The overhaul plan is a bid by chief executive Alan Joyce to protect profits and the investment-grade rating of Qantas.
Earlier this month, the airline said it would delay taking delivery of two Airbus A380s to reduce capital expenditure by a further AUD$400 million, raising capex cuts to AUD$900 million. It is also consolidating engineering, ground and maintenance operations and wants to sell some catering units.
“Like the manufacturing industry, aviation maintenance is a labour and capital intensive sector,” Alan Joyce said in a statement.
“Our cost base in heavy maintenance is 30 percent higher than that of our competitors – we must close this gap to secure Qantas’ future viability and success.”
H1 PROFIT SLIDE
The review of heavy maintenance was announced in February when Qantas said its first-half profit halved and follows the introduction of newer aircraft such as the A380 superjumbo and plans for the new Boeing 787.
“We cannot take advantage of this new generation of aircraft if we continue to do heavy maintenance in the same way we did 10 years ago,” Joyce said.
More than 90 percent of Qantas’s 30,000-plus employees are in Australia, and employee unions’ fears that it will send jobs offshore helped spark last year’s bruising industrial battle that led to the grounding of its entire fleet and prompted intervention by Australia’s industrial umpire.
Qantas said the latest decision follows a two month consultation with unions, employees and other stakeholders to discuss the challenges of having three sub-optimal heavy maintenance bases.