Qantas seems to be heading more deeper into its downward spiral which was clearly on display at its press meeting today. The airline intends to eliminate 15 percent of its workforce, slashing spending and selling gas-guzzling older planes after stiff competition at home and overseas pushed the Australian flag carrier deep into the red in the first half.
Qantas plans to cut costs by A$2 billion over the next three years, among cost-cutting measures, Joyce said Qantas would defer receipt of the final three Boeing 787 Dreamliner jets it ordered for budget arm Jetstar, as well as the eight remaining Airbus A380s it has on order. The moves are part of a plan to either defer or sell a total of 50 aircraft.The airline has also agreed to sell a lease it owns at Brisbane airport, raising A$112 million in cash.
Personally I don’t see any substantial results being obtained by this kind of cost cutting given it seems more of a knee jerk reaction compared to a well prepared turn around plan. Its a clear demonstration that Alan Joyce’s plan of prepping up international margins with an Emirates alliance and a rapid Jetstar expansion haven’t been yielding the desired result.
The airline seriously needs to rethink its strategy and focus on streamlining its costs whether its personnel costs which are one of the highest in the industry to rationalizing routes in order to drive higher yields. Given that neighbor Air New Zealand is able to make a healthy profit even in the current situation, the argument by Qantas that all its problems are stemming from so called foreign investment in Virgin Australia seem to fall flat. The employee union also seems to un-cooperative given that they have threatened to strike should the planned cost cutting go ahead. I mean what does the union prefer shutting down the airline completely or engaging with the management to identify creative ways to eliminate unwanted costs.
The most ironic fact was that the event was held in a fancy hotel instead of the company headquarters which boasts of similar facilities and when asked about why this wasteful expense was made the airline failed to provide a clear answer. It will remain to be seen how long will they survive if the continue to follow their current strategy. The need of the hour is to bring in some fresh blood which can lead the airline to a better financial position.