Qantas to cut capacity, raise fuel surcharges
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Qantas has announced a range of measures to respond to high jet fuel prices and the impact of natural disasters in Japan, New Zealand and Australia.
The airline’s Chief Executive Officer, Alan Joyce, said the measures included reductions in domestic and international capacity, retirement of aircraft, reduction of management positions and ongoing fuel surcharges.
“The significant and sustained increases in the price of fuel is the most serious challenge Qantas has faced since the Global Financial Crisis,” Joyce said. “The price of Singapore jet fuel has risen from around US$88 per barrel in September 2010, to more than US$131 per barrel today. Qantas fuel costs for the second half of FY11 will be US$2.0 billion.
“There has never been a time when the world faced so many natural disasters, all of which have come at a significant financial cost to the Qantas Group. We need to act decisively to respond to rising fuel costs and natural disasters, just like we did during the global financial crisis, to ensure the ongoing sustainability of our business.”
Qantas said its financial results for second half of FY11 will be impacted by a number of events, including the A380 engine problems (an estimated US$25 million), Australian & New Zealand natural disasters (US$140 million), and the Japanese earthquake and tsunami (US$45 million).
As a result, Qantas said it will reduce domestic capacity growth in 2H11 from 14 per cent to 8 per cent, while international capacity growth in 2H11 will be cut from 10 per cent to 7 per cent. The Group will suspend up to four return weekly Jetstar services from Australia to Japan (from 1 April to end of August), as well as Qantas services between Perth and Narita (from 8 May), and downsize Qantas aircraft between Sydney and Narita from a Boeing 747 to an Airbus 330.
In New Zealand, the Group will cut three daily Jetstar domestic services to Christchurch and one Melbourne to Christchurch daily service (all from April). The Group will also retire two Boeing 767 aircraft earlier than previously intended.
A review of manpower costs which will include the reduction of management positions and annual and long service leave balances.
“We want to limit redundancies wherever possible and will be using a range of initiatives to manage the reduction in capacity including annual and long service leave. At this stage only management positions will be made redundant,” Joyce explained.
In addition, Qantas has already increased domestic airfares and international fuel surcharges in February and March this year. Jetstar also increased fares in selected domestic and international markets in February and increased ancillary revenue, including baggage charges.
However Qantas said these measures will not be sufficient to recover the full impact of current and forecast fuel prices.
Joyce said however, that the airline would recover. “Our portfolio of businesses – Qantas Airlines, Jetstar, QantasLink, Qantas Frequent Flyer and Qantas Freight – allows us to succeed no matter what challenges we face – from economic cycles to fuel price rises and natural disasters,” he said.
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