Australian flag carrier Qantas Airways announced Thursday (25 June) that it was cutting at least 20 percent of its workforce or around 6,000 people and planned to raise at least A$1.9 billion (US$1.3 billion) in new equity as it works to “return to growth” in a market that some say will be forever changed by the COVID-19 pandemic and its effects on the global aviation industry.
CEO Alan Joyce said in announcing the company’s restructuring that Qantas would also ground at least 100 aircraft for a year or more and planned to cut costs by A$15 billion during the next three years, which it predicts will be a period of “lower activity”. Joyce said the company should have total liquidity of about A$4.6 billion following completion of the equity raising that includes A$3.6 billion in cash and A$1 billion of undrawn facilities.
Qantas said in announcing the job cuts that its plan “is designed to account for the uncertainty associated with the crisis, preserving as many key assets and skills as the group can reasonably carry to support the eventual recovery” of the airline industry. “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 (affiliate) Jetstar”, Qantas said Thursday.
“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,” Joyce said in announcing the plan. “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,” Joyce added. “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 pay-outs for long serving employees in particular.”
One person who won’t be losing their job is Joyce himself. Qantas said that the company’s board of directors asked and Joyce agreed to remain Qantas group CEO as its recovery plan is implemented and through to at least the end of the company’s 2023 fiscal year.
In addition to the 6,000 job cuts, Qantas said it will try to cut costs by A$15 billion over the next three years and includes continued “stand downs” of 15,000 employees, particularly those associated with international operations, until flying returns. The group will also retire its six remaining 747s immediately, six months ahead of schedule and may return some leased aircraft when the leases expire. The company has also deferred deliveries of its A321neo and 787-9 fleet. Qantas said the total cost of its restructuring plan is A$1 billion.
“Despite the hard choices we’re making today, we’re fundamentally optimistic about the future,” Joyce added. “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.”
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