Friday, 26 June 2020

Qantas to axe 6,000 jobs as it streamlines to face the future in a post-COVID world

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The Australian Qantas Group has announced a three-year plan to accelerate its recovery from the coronavirus COVID-19 crisis and create a stronger airline for future profitability which will see the carrier shed more than 6000 jobs.

The immediate focus of the new plan from Qantas is to downsize the airline, its fleet, its staff.  Not only will the carrier reduce its workforce by at least 6,000 roles across all parts of the business, but it will also continue the stand down or lay off around 15,000 employees, particularly those associated with international operations, until flying returns.

The airline is retiring its six remaining 747s immediately,  some six months ahead of schedule.
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Qantas will also extend the grounding up to 100 aircraft for up to 12 months, some for even longer, including most of the carriers international fleet. Some of these aircraft are expected to ultimately go back in is service with Qantas, but some leased aircraft may be returned to the leasing companies as the leases come up for renewal.  

Deliveries of new A321neo and 787-9 aircraft have been deferred to meet the new requirements.

The airline has advised the first raft of job losses will affect many areas of the business:

Non-operational – at least 1,450 job losses, mainly in corporate roles, due to less flying activity.

Ground operations – at least 1,500 job losses across airports, baggage handling, fleet presentation and ramp operations due to less flying activity.

Cabin crew – at least 1,050 job losses due to early retirement of the 747s and less flying activity. A further 6,900 cabin crew will be on stand down from July 2020 onwards.

Engineering – at least 630 job losses due to 747 retirement, less flying activity (particularly of the wide-body fleet) and redistribution of work from Jetstar’s Newcastle base to make better use of existing maintenance capacity in Melbourne.

Pilots – at least 220 job losses mostly due to early retirement of the 747s. A further 2,900 pilots will be on stand down from July 2020 onward.







The Board announced that the Group will seek to raise up to $1.9 billion, comprising of a fully underwritten institutional placement to raise approximately $1,360 million and a non-underwritten Share Purchase Plan for eligible existing shareholders to participate of up to $500 million.

Proceeds from the Equity Raising will be used to accelerate the Group’s recovery, strengthen its balance sheet and position it to capitalise on opportunities aligned with its strategy.
Photo Qantas

The Placement issue price of $3.65 per share represents a 12.9% discount to the last traded price of $4.19 on 24 June 2020.

The approximately 372.7 million new fully paid ordinary shares issued under the Placement represents a 25% increase to total shares on issue – which itself has decreased by more than a third through share buybacks in recent years.

The Qantas Group’s fuel was fully hedged for the second half of FY20, and 90% hedged for the first half of FY21.  With the significant decline in flying activity, the Group’s overall capacity flown has resulted in a substantial reduction in fuel consumption from April 2020 and the anticipated decline in consumption to June 2021 will lead to the non-cash recognition of hedge ineffectiveness of $550–$600 million in the FY20 statutory result.

The table below reflects the Group’s current expectations of significant items it expects to recognise outside of its Underlying FY20 result.
Items outside of Underlying FY201H20 Impact(previously reported)Estimated FY20 impact (subject to review and audit processes)
Transformation costs and discretionary bonuses to non-executive employees awarded in prior years$123 million~$200 million
Recovery plan restructuring costs including redundanciesNIL$600-700 million
Asset impairments including the A380 fleet (non-cash)NIL$1,250-1,400 million
Hedge ineffectiveness[2] (non-cash)NIL$550-600 million
Total$123 million~$2.8 billion




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Here is the full speech by Qantas Group CEO, Alan Joyce:

Good morning.

Today we’re making some very significant – and in some cases, very difficult – announcements about the future of the Qantas Group.

And they are focused on exactly that – making sure the national carrier has a strong future.

Aviation is used to sudden shocks. Qantas has dealt with several just in the past decade, and come through them stronger.

But we’ve never experienced anything like this before.

No one has.

Right now, all airlines are in the middle of the biggest crisis our industry has ever faced.

Efforts to contain COVID – which we all agree are so important – have devastated travel demand almost overnight.

Airline revenues have collapsed. Entire fleets are grounded. And the world’s biggest carriers are taking extreme actions just to survive.

The Qantas Group entered this crisis in better shape than most.

We’ve used record profits to strengthen our balance sheet.

We’ve built the leading full service and low fares airlines in our home market.

We’ve carved out a separate earnings stream with Qantas Loyalty.

And this gives us some of the brightest prospects for recovery.

But this crisis has still hit us very hard. And the impact will be felt for a long time – particularly, I’m very sorry to say, the impact on our people.

There are some green shoots domestically. We’re planning to be back to 40 per cent of our pre-crisis domestic flying during July and hopefully more in the months that follow. But we’ll be living with COVID for some time and recent events show we can’t take a low infection rate for granted.

It’s clear that International travel is likely to be stalled for a long time.

IATA – the peak body for airlines – says it will take more than three years for global travel to return to 2019 levels.

That means all airlines – including Qantas – must take action now. We have to position ourselves for several years where revenues will be much lower. And that means becoming a smaller airline in the short term.

THREE YEAR PLAN

Today, we’re announcing a three-year plan to guide our recovery and take us through to better days ahead. It’s a plan I’ve agreed to stay on as Group CEO to see through.

The plan has three immediate actions to safeguard the national carrier’s future – and, the majority of jobs it supports.

The first is to rightsize our workforce, fleet and capital spending for a world that has less flying for an extended period.

The second is restructuring to deliver ongoing savings across the Group’s operations in a changing market.

And the third is recapitalising through an equity raise that will strengthen our balance sheet and accelerate our recovery.

IMPACT ON OUR PEOPLE

The actions we must take will have a huge impact on thousands of our people.

This is something that weighs heavily on all of us. But the collapse of billions of dollars in revenue leaves us little choice if we are to save as many jobs as possible, long term.

Many of the 6,000 job losses we’re announcing today are people who have spent decades here. It’s not unusual to have several members of one family working at Qantas and Jetstar.

What makes this even harder is that right before this crisis hit, we were actively recruiting. We were gearing up for Project Sunrise. We were getting ready to buy planes.

Now, we’re facing a sudden reversal of fortune that is no one’s fault – but is very hard to accept.

Across the world, airlines are shrinking by up to 50 per cent.

To avoid anything on this scale, we will be extending the stand down for a large number of our people as we wait for the recovery we know is coming.

Separate to job losses, about 15,000 people will remain stood down for some time – people for whom we have no work now, but will in future.

Around half of those stood down will be back flying domestically – we think – by the end of the year. The remainder – mostly, those supporting international flying – will return more slowly.

Thousands of Qantas and Jetstar people have already found secondary employment during stand down. And the feedback from those employers is incredibly positive.

For many of our people on stand down, JobKeeper has made all the difference. We’re having good discussions with the government about possibly extending Jobkeeper, or some other form of support, for those in the aviation industry who will be stood down for an extended period.

We’re also in dialogue with state and territory governments about their border openings – because once that happens, we can get more of our people back to work.

We will do the best we can to manage the impact on those leaving the Qantas Group, and those on continued stand down. We’ll offer voluntary – rather than compulsory – redundancies as much as possible. We’ll give support for career transition. And for those stood down, we’ll give ongoing access to long service and annual leave, as well as our welfare programs.

We will consult with relevant unions over the coming days and weeks – who are well aware of the challenges facing the industry and, I hope, are ready to work with us.

RECAPITALISATION

As I mentioned, the Qantas Group has extremely bright prospects for recovery.

And the faster we recover, the sooner more of our people can get back to work.

To help with this, we have announced an equity raising for the first time in a decade – which follows a long period of returning significant capital to shareholders.

The proceeds from the raising – up to $1.9 billion – will strengthen our balance sheet and accelerate our recovery.

And once we have recovered, this capital will help us take advantage of opportunities that emerge.

There is a lot of detail on the equity raising, and an update on our financial position, in the materials released to the market today.

RECOVERY AND BEYOND

This year was supposed to be one of celebration for Qantas. It’s our centenary.

Clearly, it is not turning out as planned.

We draw strength from our long history. We know that – no matter how tough it is in the moment – we’ve always come back from a crisis stronger than before.

And we draw strength from our beginnings. Because Qantas was founded in turbulent times – straight after a world war and a devastating pandemic.

So our centenary year is, perhaps, a new beginning. The start of our ‘next century’.

And while we have to make some very painful decisions, we have to focus on that future.

We know that flying will return. Our people will be back in the skies. No aircraft will sit idle. And new ones will be arriving – including for more ultra-long-haul flights.

We’re confident because we’ve been in tough spots before. In 2013, Qantas faced an uphill battle. The turnaround that followed set us up for years of growth that was only derailed by COVID.

We know this new plan can get us back on track. Back to growth, back to profit and back to pushing boundaries with things like Project Sunrise.

In closing, I want to recognise our people. Their dedication to the national carrier – even during this time of great upheaval and uncertainty – is a big part of what will carry us through.

I want to also recognise our customers. Throughout all the recent turbulence, their support and loyalty has been amazing. From emails I’ve received, through to notes written on napkins to crew on board.

Our commitment to you is unchanged. Millions want to see the people and places they love – and need an airline to take them. Particularly in a country the size of Australia.

We will be smaller for a period of time, but we will still deliver a high level of care, and service and, above all, safety.

We’ll continue to serve regional communities. And support Australian tourism.

As the national carrier, we have a very important job to do. A proud history to uphold. And a bright future to look forward to.

Thank you.
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