Qantas has said it will cut 5,000 jobs in efforts to cut $2bn in costs after a heavy financial loss.
Qantas announced a pre-tax loss of $252m in the second half of 2013 and now plans to reduce costs by $2bn over the next three years.
The airline also plans to reduce its fleet size by more than fifty aircraft and defer eight remaining Airbus A380s currently on order. Jetstar, the airlines budget carrier, will also be affected as three Boeing 787 Dreamliners will be deferred.
Qantas Chief Executive, Alan Joyce said they are facing “some of the toughest conditions…it has ever seen”. Citing problems with the Australian Aviation policy, as competition such as Virgin Australia is owned by three government backed operators. The airline has been trying to convince the Australian government that it deserves financial backing and that rules limiting foreign ownership of the airline to 49% should be relaxed to encourage overseas investment.
As a result, the airlines’ shares sank by up to 7% at the start of trading in Australia and closed down 9%. Soon after, two ratings agencies – Moody’s and Standard & Poor’s – downgraded the airline’s credit rating to below investment grade.
Do Qantas deserve government financial backing? Are they likely to come back from such a big loss with tough industry conditions and fierce competition?