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Feb 27, 2014

Qantas shocker: $252m loss, 5000 jobs cut, shares slump … over to Abbott

Qantas has lost $252 million in the last six months and will soon lose 5000 more jobs. But CEO Alan Joyce keeps his job. Crikey's business editor examines the wreckage.

The main thing the federal government would consider when deciding whether to grant Qantas its hoped-for loan guarantees, federal Transport Minister Warren Truss told the ABC this morning, was the market reaction to today’s first-half profit announcement. Well, the initial market reaction is in — and the thumbs are not up.

Qantas shares slumped more than 7% to $1.18 after it confirmed 5000 jobs would go over the next three years in a brutal $2 billion round of cost cuts designed to restore the airline to profitability.

Almost the only job that is secure at Qantas now appears to be that of Alan Joyce, who insisted he would remain as chief executive and had the full support of the board and management for his turnaround plan. “I’m absolutely committed to Qantas,” Joyce (pictured this morning) told analysts at the briefing in Sydney, who raised his future in the very first question after the presentation.

But job cuts would be felt across “every aspect of the business”, Joyce confirmed, including pilots and cabin crew, engineers and maintenance workers, catering, management and back-office staff.

Despite rampant speculation in the lead-up to this morning’s interim profit result, the restructure of Qantas remains a work in progress. There was no split of domestic and international, no sell-down of the frequent flyer program, not even a transfer of its Australian terminal assets — just a single deal in Brisbane garnering $112 million. There was not even a trading halt.

Instead, there was the deferral of new aircraft purchases, the early retirement of some (but not all) 747s, and the suspension of new investment into Jetstar Asia in Singapore.

The actual underlying loss before tax of $252 million was right at the better end of the $250-300 million range Qantas flagged last December. But analysts were concerned about the continuing poor performance of the struggling international business, despite Qantas’ partnership with Emirates, and Joyce declined to commit out the previously targeted return to profitability by the end of 2014-15.

Joyce — who will himself take a 3% pay cut this year — announced a company-wide pay freeze and said the airline would “not be contemplating bonuses … until Qantas is profitable again”.

Joyce defended his track record and continues to blame the “unlevel playing field” which allowed Virgin — majority owned by foreign, state-backed Singapore Airlines, Etihad and Air New Zealand, but still taking advantage of bilateral flying rights as if it was an Australian airline — to raise $300 million in capital last year and continue to engage in a loss-making capacity war with Qantas.

“Qantas can compete in any fair fight,” Joyce said, “but the impact of this unlevel playing field cannot be ignored.”

Joyce reiterated Qantas’ case for government assistance and said the airline could not wait for amendments to the Qantas Sale Act — to remove the cap on foreign ownership — which could take months or years given opposition from Labor, the Greens and Clive Palmer, who together will control the balance of power in the new Senate. “In the short term I don’t see any change [to the act],” he said, “but action is needed in the short-term.”

Qantas had its credit rating downgraded to junk status last year and is seeking to pay a fee, just as the banks did in the financial crisis, to make use of the government’s AAA credit rating.

Apart from the well-flagged cuts, Joyce hardly appears to have mapped out a new strategy at all, saying Qantas’ “guiding principles will not change” — safety first, dual-brand, Jetstar Asia, and so on.

Whether all that will be enough to satisfy the government remains to be seen. Meanwhile, the deep cuts will put Qantas on a collision course with the unions. Australian Services Union secretary Linda White has already warned the union will “fight for every job” and strike action must surely be a possibility. Qantas has scheduled meetings with key unions tomorrow.

Opposition Leader Bill Shorten again accused the government of failing to fight for jobs — describing the cuts as “truly devastating” — while Greens Deputy Leader Adam Bandt said the government should secure an agreement to protect local jobs and prevent offshoring.

Bandt also reiterated opposition to the watering down of the Qantas Sale Act: “What this means in reality is Qantas being sold off to airlines owned and backed by foreign governments like Emirates, Singapore Airlines and China Southern. Foreign governments want to own Qantas, but ours seemingly doesn’t.”

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21 comments

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21 thoughts on “Qantas shocker: $252m loss, 5000 jobs cut, shares slump … over to Abbott

  1. zut alors

    How comforting it is to know the man who escalated the demise of Qantas is the same CEO to devise a ‘turnaround’ plan – with the support of the same board.

    If one of the Oz cricket team performed this badly they would be sidelined pronto. Joyce & the board must be replaced as a matter of urgency before the airline is worth peanuts.

    To produce this result from an airline with the world’s best safety record takes outstanding incompetence.

  2. klewso

    How much are they paying Joyce – and they still get monkeys?
    He’s taking a 3% pay cut while some workers are taking a 100% cut?

  3. Michael James

    On one hand Joyce rails against foreign government owned airlines, while handing vast swathes of Qantas’ profitable international business to Emirates.

    Want to fly to London, Emirates will get you there.

    Perth to Johannesburg? Emirates all the way, via Dubai.

    That is, the parts that he hasn’t handed over to Jetstar.

    Sydney to Honolulu? Can’t get there on Qantas, you have to fly Jetstar.

    Pretty soon it will be the same for Perth to Singapore.

    As it is, when I had to fly to Singapore from Sydney recently, the vast majority of Qantas flights flew from Sydney to Melbourne, required several hours in the transit lounge, the a long flight to Melbourne.

    In fact there were almost as many direct flights on Jetstar as there were on Qantas that day, and Joyce wonders why international services are losing money?

    Joyce is an idiot of the worst caliber, back by a board of fools who have supported everything Joyce has done, including no dividends for years, all the while signing him and themselves ever greater pay packets.

  4. Phillip Gray

    Is QANTAS becoming a poorly told Irish Joke??

  5. Bo Gainsbourg

    Am I right in saying that since Joyce has been at QANTAS he has presided over a massive destruction of shareholder value? Also that no viable airline in the world proceeds these days without government backing? All governments make decisions, ours have been making decisions that they don’t want an Australian national airline. Its the politics my friend.

  6. db

    If someone had a desire to drive down the sale price of an airline to sell it off to Emirates or similar for some sort of personal advantage how much would it differ from the way Joyce is running Qantas?

    Whether it’s deliberate or not it does not look good.

  7. Venise Alstergren

    Alan Joyce has all the leadership values, charisma and foresight of a small town English bank manager. Admittedly a series of QANTAS boards of directors have always been dominated by a post colonial collection of Colonel Blimps. A quality our Prime Minister-an anglophile of the first order-would naturally be drawn to.

    A CEO who axes five thousand jobs and, at the same time, settles for a THREE PERCENT cut in his own wages is all heart (joke) and no brains. I must be becoming senile because I have these gaps in my mental state. Gaps where I hear the ghostly refrain of Joe Hockey’s voice saying the era of entitlements is over??!! Over for whom?

  8. Patrick

    I think Joyce realises he will never get another job. So he is going to ride this one for as long as he can until the sun finally sets. Now are the board & shareholders happy for that to happen?

  9. colin skene

    How is this **nt still in a job? And, someone tell us what his pay out will be when he finally realises he has presided over a monumental c**k up. UNFATHOMABLE!!!!!!!!

  10. colin skene

    How is this joke of a CEO still in a job? And, what will be his payout when enough people realise he has presided over a massive c**k up of our (supposed) flagship carrier. His remaining in charge is comnpletelt UNFATHOMABLE!! Moreover, do you think he cares?