After Chief Executive Officer Alan Joyce announced airline giant Qantas would be cutting 5000 jobs and is $252 million in the red for its first quarter, the federal government shut down Qantas’ request for a debt guarantee which in turn, sent their stock tumbling downward to more than 7%.
Qantas, who posted a $111 million profit a year earlier, said they are up against rising fuel costs and stiff competition. The company is looking to cut their budget by $2 million over the next three years.
The administration was torn between lending financial assistance to Qantas with Labor agreeing to support a debt guarantee but would not back a law that would increase overseas interest in the company over 49%.
Prime Minister Tony Abbott was more direct, advising the upper house that Qantas’ situation was not extreme enough to warrant a debt guarantee.
“Why should the government do for one what it is not prepared to do for all, or what is not necessarily available for all?’’ he said.
In fact, John Borghetti of Virgin Australia, said they too, would request a debt guarantee “within 24 hours” if one were to be granted to Qantas.
The Prime Minister encouraged Qantas to strengthen their battle with other airline opponents and lock-down overseas funds and investments.
“We want to ensure that Qantas is not competing against its rivals with a ball and chain around its leg,’’ Mr. Abbott said.
On the other side, Bill Shorten, the Opposition Leader, believes it’s the government’s duty to assist Qantas.
“This is the worst day for aviation people since the collapse of Ansett,’’ he said.
Anthony Albanese, a representative for the opposition’s transport section, thinks modifying the Qantas Sale Act would almost be a waste of government time because if it were a matter of overseas investment, the company would be hitting its target 49% overseas ownership maximum instead of its present 39%.
In addition, Mr. Albanese concluded, altering the act would result in other issues such as the divide of Qantas’ international and domestic businesses and, a significant amount of work moving overseas.
Nick Xenophon, an Independent Senator requested an official investigation be sought into Qantas’ financial and business practices, specifically its dealings with Jetstar and the immediate dismissal of the entire Qantas board including Mr. Joyce.
“The jobs that should have been lost are Alan Joyce and his board,’’ he said.
However, Mr. Joyce was more optimistic and said he is 100% devoted to Qantas and is eager to set the company on a new path.
“We have a plan to cover every aspect of the business to get it back to profitability and we have the courage and commitment of the management team to make that happen,” he said.
Unions are outraged at Qantas’ financial status and are threatening to strike. Mr. Joyce says striking would only make matters worse.
Here is a list of Qantas’ main concerns as they continue to take steps in directing the company forward:
- Fundamental first half loss of $252 million before taxes
- Intending to cut $2 billion in cost over 3 years
- Capital expenditure to be cut by $1 billion over next 2 financial years
- 5000 jobs to be cut from a 33,000-strong workforce
- Halt wages for all staff; chief executive Alan Joyce already cut own pay by 36%
- Older planes retired, including 6 Boeing 747 jumbo jets
- Acquiring new A380s and B787-8s delayed
- Cut back on aircraft maintenance operations and catering
- Underperforming routes to be cut, including Perth to Singapore
- Brisbane Airport lease to be returned to airport corporation for $112 million; will retain exclusive use of northern end of terminal until 2018
- Discussions with Melbourne and Sydney airports on its terminals are continuing
- Additional assets are under discussion for sale though no decision has been made