The Qantas Group has announced a three-year plan to accelerate its recovery from the COVID-19 crisis, including some very deep cuts to the business.
The plan is expected to save the company $15 billion over three years, in line with reduced flying activity including fuel consumption savings, and deliver $1 billion per annum in ongoing cost savings from FY23 through productivity improvements.
A key action of the plan includes reducing the group’s pre-crisis workforce by at least 6,000 roles across all parts of the business and continuing the stand-down for 15,000 employees, particularly those associated with international operations, until flying returns.
Of the Qantas Group’s 29,000 staff, around 8,000 are expected to have returned to work by the end of July.
The company anticipates this will increase to around 15,000 by the end of calendar year 2020 in line with the opening up of domestic flying, and increase further during calendar 2021 and 2022 as the international network returns, reaching 21,000 active employees by June 2022.
Qantas will also retire its six remaining 747s immediately, six months ahead of schedule, as well as grounding up to 100 aircraft for up to 12 months (some for longer), including most of its international fleet.
The company expects the majority to ultimately go back into service, but it warned some leased aircraft “may be returned as they fall due”. Qantas’ A321neo and 787-9 fleet deliveries have been deferred to meet the group’s requirements.
The cost of implementing the plan is estimated at $1 billion, with most of this to be realised during FY21.
Qantas is also launching an equity raising of up to $1.9 billion to accelerate recovery and position for new opportunities.
Subsequent phases of Qantas’ plan focus on the increasing ramp-up of flying and pursuing new opportunities, including its ambition for more non-stop international flights.
At the board’s request, Alan Joyce has agreed to remain as Qantas Group’s CEO as the recovery plan is implemented and through to at least the end of FY23.
In announcing the plan, Qantas Group CEO Alan Joyce said the company entered the coronavirus crisis in a better position than most airlines, and has 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,” he conceded.
“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.”
Joyce said most airlines will have to restructure in order to survive, resulting in leaner and more competitive carriers.
“For all these reasons, we have to take action now,” he said.
“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.”
“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 payouts for long-serving employees in particular.”
Joyce said Qantas’ new plan gives the group flexibility under a range of scenarios, including a faster rebound or a slower recovery.
“Despite the hard choices we’re making today, we’re fundamentally optimistic about the future,” he said.
“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.”
TWU slams Qantas and government over job losses
Qantas’ job cuts have been met with fierce criticism from the Transport Workers’ Union (TWU), which said the airline should hold off until a federal government review extending JobKeeper.
“Before Qantas slashed thousands of workers’ jobs and takes more of its planes down to the pawn shop, it should be lobbying the federal government for an extension to JobKeeper and financial support to allow the airline to weather the crisis,” TWU national secretary Michael Kaine said.
“The Qantas CEO is very good at walking the halls of Canberra when it suits his agenda, yet he is quick to cut jobs and hang workers out to dry. We are demanding that he halt these redundancies until the federal government makes an announcement on JobKeeper.”
“We have been calling on the government for months to step in with a national plan for aviation and they have refused. It is because of government restrictions that aviation was grounded to a halt, yet the assistance and assurances have been paltry.
“Qantas is now making hasty decisions to slash jobs which will affect thousands of families, while Virgin is still limping along.”
Featured image: iStock/Katharina13