Qantas chief executive Alan Joyce. Photo: Nic WalkerAir New Zealand profit leaves Qantas in the shade
Qantas chief Alan Joyce faces one of the biggest tests of his career on Thursday when he is expected to reveal more than 3000 job cuts, the early retirement of planes and airport terminal sales.
With the airline set to notch up its biggest first-half loss since it was floated in 1995, Qantas management will reveal how it intends to rip $2 billion in costs out of the business over the next three years.
The carrier has warned it will post a pre-tax loss of between $250 million and $300 million in the first half, a period during which Australian airlines typically make the lion’s share of their earnings.
At the same time the federal government is set to provide Qantas with a debt guarantee, meaning the taxpayer would foot the bill should the airline default.
The government has made clear it will attempt to relax regulations which prevent the airline from majority foreign ownership.
Flight Centre managing director Graham Turner also weighed in on the debate about the government extending help to the airline, saying Qantas needed to be freed from the restrictions of the Qantas Sale Act and its heavily unionised workforce.
But Mr Turner said the removal of the foreign ownership restrictions was preferable to the government extending assistance in the form of standby debt facility.
”You can’t keep things in Australia just to protect local industry when you have international competition which will inevitably go to the places where things are more efficient,” he said.
”With international airlines, you are working in a competitive international market, and you have to be competitive in the long-term or there is not going to be a viable future for the business.”
Still, Australia’s largest regional airline has launched a scathing attack on Qantas’ attempts to have the Abbott government stand behind its debt.
Regional Express deputy chairman John Sharp – a former Howard government transport minister – said the move would distort the industry.
“If the Australian government backs Qantas, Qantas will then be a government-backed airline, and so Rex will be confronted with two government-backed airline operations that we will be competing with, and that I think is unfair, that I think is a significant distortion of the marketplace,” Mr Sharp said.
Virgin Australia’s key shareholders include United Arab Emirates-backed Etihad. It also counts Singapore Airlines and Air New Zealand as investors – airlines that also count on state support.
Mr Sharp said if the government decided to guarantee Qantas’ debt, it should guarantee the debt of the whole airline industry in Australia.
”We all agree with a level playing field, but if you don’t guarantee the other airlines, and only guarantee Qantas, you will be creating an unlevel playing field, and we’ll be on the unlevel part of it,” Mr Sharp said.
The attack on Qantas comes after Rex reported a 60 per cent fall in first-half profit, down to $3.6 million. Passenger numbers fell 5.1 per cent compared to 2012 to just under 550,000. Rex will not pay an interim dividend.
During the global financial crisis, the Australia government provided a debt backing for the country’s banks. Mr Sharp said the same principals should be applied to not create an uncompetitive environment.
Meanwhile, brokerage CLSA questioned Qantas’ strategy of maintaining a 65 per cent share of the domestic market. ”What we don’t understand is why Qantas appears to have focused on growing capacity to protect market share, particularly with slowing market growth.”
Qantas has left observers to speculate it will axe thousands of jobs from its 33,000-strong workforce.