Qantas to cut salaries, costs, jobs
The Group expects to report an underlying loss before tax in the range of $250 million to $300 million for the six months ending 31 December 2013. Trading conditions saw a marked deterioration in November in particular, with both passenger loads and yields below the already negative trends for the year to date.
Group capacity is expected to increase by 1.1 per cent in 1H FY14 compared to 1H FY13. Group Domestic capacity (comprising Qantas Domestic, QantasLink and Jetstar Domestic) is expected to increase by 1.9 per cent in 1H FY14 compared to 1H FY13.
Total domestic market capacity is expected to increase by approximately 2.7 per cent, driven by estimated competitor capacity growth of 3.9 per cent.
Group yield (excluding the impact of foreign exchange movements) is expected to be approximately 3.5 per cent lower in 1H FY14 compared to 1H FY13, largely due to increased capacity in the domestic and international markets.
Group loads are expected to be 1.6 percentage points lower in 1H FY14 compared to 1H FY13, Underlying fuel costs (excluding the impact of the carbon tax) for 1H FY14 are expected to be approximately $2.27 billion, an increase of $88 million from 1H FY13.
The group will make accelerated cost reductions across all areas of the business, to achieve total cost savings of $2 billion over three years.
The existing Qantas Transformation program will be accelerated, with an expanded mandate to achieve these targets, including head count reduction of at least 1,000 positions within 12 months, with an ongoing review, CEO and Board pay cut, pay freeze and no FY14 bonus for executives, review of spending with top 100 suppliers, network optimisation and improved fleet utilisation, further overhead reductions.
Given the deterioration in earnings, the group no longer expects to generate positive net free cash flow in the current financial year.
The Qantas Group responded to the announcement by Standard & Poor's that Qantas' credit rating of BBB- (outlook stable) has been lowered one notch to BB+ (outlook negative).
Qantas Group Chief Financial Officer, Gareth Evans, said: "A downgrade was not unexpected following yesterday's market update. It highlights the unprecedented pressures that the Qantas Group is facing from several external forces but particularly from an uneven playing field in the Australian aviation market." ■