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as part of the Qantas Group’s $2 billion cost reduction program. These measures can be best summarised as being smarter and more efficient by “doing more with less”. We are cutting back where we can to invest where we need to. The changes we are announcing today are designed to strengthen our core, while never losing sight of what’s important – we will never compromise on safety and we will continue to invest in the customer experience. The proposed job cuts are designed to protect as many Qantas jobs in the long term as possible. FLEET Qantas will accelerate the retirement of older, less efficient aircraft. Separately, we will also defer or sell aircraft and review options for aircraft on order. Some of the key changes include: Airbus A380 – Qantas currently has 12 A380s. Qantas International’s eight remaining A380 orders will be deferred, with an ongoing review of delivery dates to meet potential future requirements. These were due to be delivered from FY17, and have a list price of US$414 million each. Boeing 747 – Qantas currently has 15 Boeing 747 aircraft. All six of Qantas International’s older, non-reconfigured B747s will be retired ahead of schedule by early-2016. The youngest nine of our B747s, with upgraded A380-standard interiors, will remain in the fleet. The last of these aircraft was delivered to Qantas in 2003. Boeing 767 – Qantas ’ remaining 15 B767 aircraft will be retired by early 2015, several months ahead of schedule. Boeing 737 – Qantas has been steadily updating its fleet of 70 Boeing 737 aircraft, which now have an average age of 6.3 years. The remaining two older Boeing 737-400 aircraft were retired this month. Qantas will continue to receive an additional five B737-800 next Generation aircraft this year. The list price for this aircraft is US$90 million. Boeing 787 – Three of Jetstar’s 14 B787-8 deliveries will be deferred. Jetstar currently has three B787s. The list price for this aircraft is US$211 million. The Qantas Group retains 50 option/purchase rights for the B787 family, with any decision on these to be made when Qantas International returns to profitability. Decisions will be made on the options as each aircraft comes up – they don’t need to be decided on as a group. Airbus A320 – Jetstar’s A320 order book has be en substantially restructured. The list price for this aircraft is US$94m-103m.
By 2016, the Group’s passenger fleet will have been simplified from 11 aircraft types to just seven aircraft types, with an average age of eight years. This compares favourably to other legacy airlines such as British Airways (13.2 years), American Airlines (13.9 years), Delta Airlines (17.3 years) and Cathay Pacific (8.9 years). This reflects the significant investment we’ve made in the past four years on new aircraft.
Qantas Group average fleet age
Average fleet age for other international airlines
Over the next 12 months, Qantas will make adjustments to its network to improve efficiency – including higher aircraft utilisation (i.e. more flying time per aircraft) and changes to which aircraft fly on which routes. In the domestic market, our market share strategy for Qantas and Jetstar will remain unchanged, maintaining our network, product and frequency share in the premium market and our scale advantage in the leisure market. Domestic Qantas will better utilise its aircraft by reviewing turn times (i.e. the length of time each aircraft spends on the ground before departing again) for domestic services, which are currently the longest in the domestic market. Through shorter turn times and fleet simplification, Qantas Domestic will increase utilisation of narrow-body aircraft, allowing A330s in the domestic market to concentrate solely on EastWest services and peak services on the Sydney-Melbourne-Brisbane triangle. This shift will free up A330s to enter the Qantas International fleet, and in turn replace the older B747s we are retiring. QantasLink will cease seasonal flights from Sydney – Mount Hotham, due to poor commercial performance.
Qantas International will withdraw from the Perth-Singapore route in May 2014, due to poor commercial performance. However, we will look at more opportunities for seasonal services on this and other routes (e.g. similar to our recent services on Perth – Auckland during the summer holidays) Qantas services between Melbourne and London will be re-timed in late-2014 to reduce A380 ground time in Heathrow (currently around 17 hours) From later this year, Qantas’ Brisbane-Singapore and Sydney-Singapore services will be operated by A330s instead of B747s later this year, which will help facilitate the early retirement of our older B747s From later this year, Qantas’ Sydney – Honolulu service will be operated by Airbus A330 instead of a Boeing 767, which will help facilitate the early retirement of our 767 aircraft
JETSTAR IN ASIA Qantas is a minority investor in four Jetstar-branded airlines in Asia. This includes Jetstar Asia (49 per cent interest), Jetstar Japan (45 per cent), Jetstar Hong Kong (33 per cent) and Jetstar Vietnam (30 per cent) The Qantas Group has indicated that our investment is small in the context of the Group (approximately $300 million in invested capital, which is less than the price of one A380 and the opportunities for Jetstar in Asia are significant. However we need to take the right decisions in accord with current market circumstances and our balance sheet, therefore growth in Singapore has been suspended by the Jetstar Asia board. The focus remains on bedding down existing businesses INVESTING IN CUSTOMER EXPERIENCE While we need to reduce our costs, we will never compromise on safety and we will continue to invest in the customer experience. Investment in our customers is essential to maintain our competitive advantages. Among the key investments that will continue are: New cabins for our A330s creating a ‘best in class’ product in the domestic and international markets New lounges in Los Angeles, Brisbane (domestic) and Hong Kong Continued roll out of our Boeing 787 aircraft to Jetstar Qantas loyalty customer innovation, including Qantas Cash, AQUIRE and expanding our partners Ongoing staff training and business-wide commitment to excellence to maintain record customer satisfaction IMPACT ON WORKFORCE As part of the $2 billion cost reduction program Qantas will be reducing employee numbers by the equivalent of 5000 full time staff by the end of FY17. This number includes the 1,000 full time staff announced last December. This represents approximately 15 per cent of our total workforce and is similar in size and scope of the restructuring by other legacy airlines (including British Airways and American Airlines). The majority of impacted employees will leave the business within 18 months.
This will be managed through reductions right across the Group, including: Reduction of management and non-operational roles by 1500 Operational positions affected by fleet and network change Restructure of line maintenance operations Restructure of catering facilities, including the closure of Adelaide catering, as previously announced. The closure of Avalon maintenance base, as previously announced. A range of measures will be used including natural attrition, voluntary redundancies, compulsory redundancies and redeployment to other roles. Qantas will provide significant support including redundancy packages well in excess of the legislative requirements, career transition, access to skills and training programs and counselling for employees and their families. Wage and bonus freeze Qantas will continue the current wage and bonus freeze for all Group executives, and will implement a wages freeze across the entire Qantas Group. The wage freeze will be: Ongoing for executives Immediate for open EBAs Proposed for other EBA-covered staff Pay increases and bonuses will not be contemplated until Qantas is profitable again. This is in addition to the reduction of fees paid to the Qantas board and a reduction in the take home pay of the Qantas Group CEO by 36 per cent this financial year. Below is more detail on some of the changes to the workforce. More specific details on the three year program will be provided as programs are implemented. Corporate Head office staff Management and non-operational roles will decrease by 1,500 across the Qantas Group – representing 30 per cent of the Group’s management and non-operational staff and will include a cross-section of functions. The majority of positions will come from Qantas’ head office in Mascot. Airports Domestic Airports Qantas intends to run a voluntary redundancy program at its domestic airports operations to better reflect change customer behaviour, adapt to changes in technology and align staffing levels with flight scheduling. This is largely due to customers preferring automatic check in facilities and online purchases. Given this is a voluntary redundancy program; we will assess interest before finalising the number. Sydney International Airport Qantas intends to run a voluntary redundancy program for full-time employees at Sydney International Airport to better align staffing levels with flight scheduling. There will be changes to the mix of customer service staff to better suit the peak periods at the airport. This will result in an increase in part-time staff and a reduction in full-time staff. Eligible employees will be able to express their interest for a voluntary redundancy package and some are expected to convert to part-time roles. Given this is a voluntary redundancy program; we will assess interest before finalising the conversion number. The changes will not impact the level of customer service we provide.
We are conducting a voluntary redundancy program for domestic Qantas domestic cabin crew, which is a result of the reduction in our fleet size. Engineering Qantas has today announced a restructure of its line maintenance operations (i.e. smaller maintenance tasks done on every aircraft every 1-2 days) to better reflect the reduced maintenance required on modern aircraft and the retirement of older aircraft. In this financial year, we are retiring 15 legacy aircraft, including two Boeing 747s, seven Boeing 767s and six Boeing 737-400s. These aircraft have been replaced by more efficient aircraft that have been designed to require less maintenance, less often. The changes Qantas will implement include: A reduction of up to 300 line maintenance positions across Sydney, Melbourne, Brisbane and Adelaide, as well as a reduction in administration and support staff. Implementing recommendations from Boeing to improve and optimise our maintenance plan for our Boeing 737 and 747 aircraft, which will result in maintenance tasks being grouped together instead, of smaller, more frequent checks. (The frequency of tasks remains the same but they will be synchronised into one check rather than lots of separate checks. This creates efficiencies, such as removing access panels once to access several components at the same time rather than removing the same panel several times on different occasions to access just one or two parts) Better synching of maintenance schedules with flight schedules to make more effective use of time that aircraft spend on the ground and reduce the need to take them out of service for maintenance. This approach has already increased the amount of A380 flying Qantas does and will provide the equivalent of one additional B737 for use in domestic/charter markets Recruiting for engineers in Perth Line Maintenance and Brisbane Heavy Maintenance to meet maintenance demand. The majority of these roles are for a fixed period to support spikes in the maintenance plan. Qantas maintenance standards remain over-and-above what is recommended by Boeing and regulations by CASA. Any suggestion that these changes reduce safety levels is wrong. This is in addition to the 300 employees at our Boeing 747 heavy maintenance facility in Avalon. Qantas Courier Qantas will close the Australian operations of its Qantas Courier business, a wholly-owned subsidiary of Qantas Freight. In recent years Qantas Freight has narrowed its strategy from being a road express and door-to-door air express freight provider to focus solely on airport-to-airport air freight services. Qantas Courier has not been profitable for several years and represents 1 per cent of revenue for Qantas Freight in FY13. Qantas Freight’s international and domestic air freight business is not impacted by this decision. The business will continue operating in New Zealand. There are 36 employees impacted who will be provided redundancy packages.
Catering Qantas Catering will be running a voluntary redundancy program for employees in the Corporate Head office and across its centres in Melbourne, Brisbane, Perth and Sydney. These voluntary redundancy programs will improve the way Catering utilises its resources and better manage its costs. We anticipate around 80 positions to be impacted. We’ve been transforming the catering business for some time and will continue to make structural changes to build a sustainable and flexible catering model. The changes implemented will not have an impact on catering provided to customers. Qantas’ catering facility in Adelaide will also close in March as previously announced. 180 employees are impacted as a result of the closure.
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