Qantas just posted a $252 million underlying loss for the first half of the year, the worst six-month result since the company went public.
Chief executive Alan Joyce said the result was “unacceptable and unsustainable” and laid out the details of how the company plans to make $2 billion in cost savings over the next three years.
Critically, there wasn’t much announced in terms of asset sales. The airline announced a deal with Brisbane Airport to exit its lease early which will result in $112 million in cash payments. There has been speculation about other leases in Melbourne and Sydney, and also over a partial or whole float of its $2.7 billion Frequent Flyer business. Nothing was announced on these issues today with the airline only saying it had “identified a number of high-quality assets of significant value”, and added no final decisions had been made about other assets.
The share price is getting hammered, continuing to fall as Alan Joyce spoke to the media in Sydney. It was down more than 8% at one point.
On top of 5000 job cuts the airline will exit some routes, retire some aircraft earlier than planned, and cut capital expenditure by $1 billion.
Here’s a summary of all the measures outlined today, from the strategy update:
Fleet and network
- Increased use of narrow-body aircraft by Qantas Domestic
- Larger A330-200s will be freed up to enter Qantas International to speed up the retirement of 747s
- All six of the older configuration 747s will be retired ahead of schedule
- All 767s will be retired by 2015
- Eight remaining A380 orders will be deferred
- Three 787-8s for Jetstar will be deferred
- A320 order book restructured
- A total of 50 aircraft to be deferred or sold
- Simplifying the fleet to seven aircraft types instead of 11
Changes to routes and capacity
- No more Perth-Singapore service; Brisbane-Singapore and Sydney-Singapore will be operated by A330s instead of 747s.
- Changes to the Melbourne-London A380 service to reduce time on the ground. While there’s no change to overall capacity it means there’s another A380 available and the airline is trying to figure out what to do with it.
- 5000 jobs to go
- Reduction of 1,500 management and non-operational roles
- Company-wide wage freeze
- Closure of the Avalon maintenance facility
- Changes to catering services in Adelaide
Capital expenditure will be reduced by $1 billion over the next three years.
Airport leases and other assets: As mentioned, this is where the market was probably looking for more. The airline has announced a deal with Brisbane Airport to get out of its lease which ran until 2018, and that’s worth $112 million in cash payments. But there wasn’t anything else announced here, contrary to expectations.
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