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Qantas responds to high fuel prices and disasters

: Apr 27, 2011 - : 10:44 am

Qantas is to cut capacity, costs and increase fuel surcharges in response to high oil and jet fuel prices and the impact of natural disasters in Japan, New Zealand and Australia.

Qantas chief executive officer, Alan Joyce, said the measures included reductions in domestic and international capacity, retirement of aircraft, reduction of management positions and ongoing fuel surcharges. He said that labour reductions would be restricted to management “for the time being.”
“The significant and sustained increases in the price of fuel is the most serious challenge Qantas has faced since the global financial crisis,” Joyce said.

“The price of Singapore Jet Fuel has risen from around US$88 per barrel in September 2010, to more than US$131 per barrel today. Qantas fuel costs for the second half of FY11 will be A$2.0 billion.

In addition, Joyce said that natural disasters had costs the group A$140 million – A$60 million for the Queensland floods; $A20 million for cyclones Yasi and Carlos; A$15 million for the Christchurch earthquake; and A$45 million for the Japanese earthquake and tsunami.

In addition, the uncontained explosion of a Trent 900 engine on an Airbus A380 last year will cost the group A$25 million in the second half of the 2011, financial year, on top of the A$55 in the first half.

“There has never been a time when the world faced so many natural disasters, all of which have come at a significant financial cost to the Qantas Group.

“We need to act decisively to respond to rising fuel costs and natural disasters, just like we did during the Global Financial Crisis, to ensure the ongoing sustainability of our business.”

The measures taken include;
– Reduction of Qantas Group domestic capacity growth in 2H11 from 14 per cent to 8 per cent and the reduction of Qantas Group international capacity growth in 2H11 from 10 per cent to 7 per cent;

– Suspension of up to four return weekly Jetstar services from Australia to Japan (from 1 April to end of August); the suspension of Qantas services between Perth and Narita (from 8 May); and downsizing of Qantas aircraft between Sydney and Narita from a Boeing 747 to an Airbus 330;

– Reduction of three daily Jetstar domestic New Zealand services to Christchurch and one Melbourne to Christchurch daily service (all from April);

– Fleet changes with the early retirement of two B767 aircraft; and

– Review of manpower costs which will include initiatives to reduce management headcount and annual and long service leave balances.

“We want to limit redundancies wherever possible and will be using a range of initiatives to manage the reduction in capacity including annual and long service leave. At this stage only management positions will be made redundant,” Mr Joyce said.

In addition, Qantas has already increased domestic airfares and international fuel surcharges in February and March this year in response to rising fuel prices. Jetstar also increased fares in selected domestic and international markets in February and increased ancillary revenue, including baggage charges.

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