Qantas CEO Alan Joyce this morning delivered what he conceded was a poor half-year-to-December 31 performance by the company, while leaving considerable uncertainty hanging over jobs, services and the future of an Asian premium carrier plan.
It was a subdued performance, which leaves shareholders will no dividends for a third straight year, after a six-month period in which the statutory profit after tax collapsed from $241 million in the previous corresponding half to $58 million (and lower at $42 million if controlled entities are included).
The underlying profit-before-tax metric that Qantas prefers dropped from $417 million to $202 million, a result that included the effects of a $194 million cost from industrial action and the grounding of the carrier that followed.
The confirmed job losses at the airline will be 500 positions in areas including airworthiness engineers and pilots, with Joyce saying he expected a further impact on employment from a consultative review process that will, by the end of March, see the consolidation of two heavy-maintenance centres in Victoria and one in Brisbane into only one or two.
He did not discourage speculation that either the Avalon or Melbourne Airport heavy-maintenance centres would be closed, which would cost at least another 400-500 jobs, and an Adelaide catering centre would be closed and not replaced at the end of the year because of the rebuilding of that airport.
Joyce said that none of the job losses that would result from reducing capital expenditure by $700 million a year would go offshore. They would instead disappear.
He also vowed that the greater part of heavy aircraft maintenance of Qantas jets would remain in Australia, while noting that when the much-delayed Boeing 787 Dreamliners begin to arrive, they will not require any heavy maintenance for 12 years.
It is separately understood that all the 50 Dreamliners on order will be based offshore, unless the carrier chooses to change course and use them as urgent replacements for domestic 767s, which have become a major headache for the Qantas in terms of reliability and the costs of aged airframe maintenance.
Qantas will cancel flights between Auckland and Los Angeles, and Singapore and Mumbai, but will upgrade the tag flight between Los Angeles and New York City to a Boeing 747-400 following the cancellation in coming months of the A330 rotations to LAX from Auckland and on to JFK.
However, overall the 747-400 fleet will now lose six rather than the previously announced four jets this year, and Qantas is also slowing the introduction of new Boeing 737-800s into the domestic fleet to help meet its capital expenditure reduction target, which is the difference between current cash flows of $1.7 billion a year, and the previously scheduled expenditure of $2.5 billion a year on fleet renewal.
This is a painful choice for the airline. It needs urgent fleet renewal to slash its fuel costs by investing in new technology jets that use much less fuel, but this would have pushed it into borrowing an additional $700 million a year to close the gap that had opened up between cash flows and cap ex requirements.
The somewhat over-the-top rhetoric that Joyce has previously used to describe his plans for an Asia-based, minority-owned, narrow-body premium carrier, for which Red Q was said to be a possible name, was missing this morning.
As previously leaked, he said Qantas was now talking to an existing partner in Malaysia (Malaysia Airlines) and a potential partner (Air Asia, the main Jetstar rival) about a capital light joint venture for the new airline, and said, several times: “We want to spend as little money on fleet for this as possible.” He indicated it could now be some months before such a deal is reached.
What does all this mean for Qantas customers? Fuller domestic jets, and even fewer international options than now in terms of flying in Qantas jets rather mid-trip changes to other foreign carriers.
What does it mean for Qantas employees? Continued fears of substantial job losses.
What does it mean for Qantas shareholders? No sign of dividends, and every sign of a continued depressed share price.
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