Australia's Qantas axes managers, flags more cuts

SYDNEY - Qantas Airways Ltd said today it would slash nearly 200 management jobs by September in a three-year cost-cutting plan that remained on track to exceed A$1.5 billion ($1.46 billion) by June 2006.

The 15 per cent reduction in management ranks was the start of cuts elsewhere in the business as Australia's biggest airline targeted a lower cost structure, Qantas chief financial officer Peter Gregg told the Asia Pacific Aviation Summit in Sydney.

"We've done this quietly, we've done this professionally, but it is a forerunner of things that we will need to do to the rest of our business," said Gregg, who was appointed the CFO in 2000.

Qantas and other shareholder-owned airlines such as British Airways Plc have been restructuring in response to excess capacity in the global industry, exacerbated by higher fuel prices, state-subsidised carriers and more low-cost airlines.

Jet fuel prices have soared on the back of higher crude oil prices, which climbed to a record US$64 ($93.51) a barrel in New York overnight. The cost of jet fuel traded in Singapore has risen by more than 40 per cent this year.

Qantas, whose more than 38,000 staff make up nearly 30 per cent of total costs, posts its results on August 18. Analysts on average forecast its fiscal 2005 net profit to rise 12 per cent to a record A$729 million, according to Reuters Estimates.

Gregg said to date Qantas had made more than A$1 billion in annual savings under its restructuring plan, dubbed the "Sustainable Future Programme", and was expected to deliver additional annual savings of at least A$500 million by June 2006.

He declined to say how many more jobs would be cut.

Qantas was also targeting a reduction in unit costs of 5 per cent a year, excluding the impact of fuel, Gregg said.

"That is very aggressive," he said.

The Australian government is reviewing its international aviation policy. Under laws enacted in 1992, overall foreign ownership of Qantas is limited to 49 per cent. Single foreign investors are restricted to no more than 25 per cent, while foreign airlines are limited to a maximum 35 per cent of Qantas.

Singapore Airlines Ltd, the world's second-biggest airline by market value, has been lobbying Australian authorities for access to the lucrative Sydney to Los Angeles air route.

"The challenge for government is to continue to open up markets, but at the same time to recognise that if Australia is to have a healthy and strong airline industry, with the flow on benefits that this has to the rest of the economy, it needs to take a measured and strategic approach," Michael Taylor, secretary of Australia's Transport Department, told the summit.

Shares in Qantas had edged 0.3 per cent lower to A$3.30 by 12.03pm in a slightly weaker market. The stock has trailed the benchmark S&P/ASX 200 Index, which touched a record on Monday, by about 18 percentage points so far this year.

- REUTERS