Qantas to wetlease from Jetstar?

[Yada Yada]

Qantas flags more cost cuts
Scott Rochfort
June 22, 2006

QANTAS plans to hack even further into its cost base after slashing forecast earnings by 25 per cent as surging oil prices continue to play havoc with the airline industry.

The national carrier has put its 37,000 workforce on notice, warning that unless fuel prices ease further sacrifices will have to be made on top of the airline's $3 billion five-year cost-cutting program.

In recent weeks Qantas has issued about 2000 redundancy slips. The airline's warning of further cost cutting came after it forecast a 25 per cent slump in full-year pre-tax profits to around $670 million.

Qantas said this was at the lower end of analyst forecasts, some of which were as high as $895 million.

<...snip...>

Qantas chief financial officer Peter Gregg declined to elaborate on areas targeted for cost cuts.

Given the airline's $3.2 billion a year staff bill - its biggest cost component - analysts expect more lay-offs and further cuts in overtime pay.

Unions fear Qantas will focus on hiring cheaper staff through its low-cost subsidiary Jetstar.

<...snip...>

Mr Gregg said he had "no idea" about speculation that Qantas's full-service operations may soon lease aircraft and crews from its low-cost Jetstar subsidiary.

There is speculation the airline may lease Boeing 787s from Jetstar when the new jets are delivered from 2008, in an attempt to drive down labour costs.

"Realistically Qantas will do what it needs to do to continue to operate," Mr Gregg said. "Whether or not Jetstar provides wet-leasing capacity to Qantas, I think that would be some time away."

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Given the hammering that the Qantas share price is currently taking and the poor market outlook, perhaps wetleasing from JQ is now firmly on the horizon. It's a clever way to drive down the wages bill and remove conditions that they find costly. And they already have the precedent of doing this with the winding up of AO services (info here (Australian Airlines bites the dust!)) .

You would assume that this is simply a cost saving exercise for Qantas but I wonder if it might affect passengers too? Will JQ-trained crews provide the same level of (grumpy) service when operating QF flights, or will we also see a shift towards a low-cost approach given the crew's LCC training and experience?

[browski]

So they are only going to make between $670,000,000 and $875,000,000 in 365 days of shameless gouging. The sky is falling, the sky is falling......

[JohnK]

You would assume that this is simply a cost saving exercise for Qantas but I wonder if it might affect passengers too? Will JQ-trained crews provide the same level of (grumpy) service when operating QF flights, or will we also see a shift towards a low-cost approach given the crew's LCC training and experience?

I think the signs are there that we will see the majority of QF services deteriorating to the point where they are run under the Jetstar LCC brand.

If fuel costs are hitting them that hard how come they are still able to make $670 million profit?

The article also mentions that their biggest cost is wages/salaries at $3.2 billion. I think it is time they started chopping from the top if they really want to save some money.

[Yada Yada]

The article also mentions that their biggest cost is wages/salaries at $3.2 billion. I think it is time they started chopping from the top if they really want to save some money.

That's a very good point. I remember seeing the annual salary reported when the head of IT left QF. It was obscene.

[jakeseven7]

Given the hammering that the Qantas share price is currently taking and the poor market outlook, perhaps wetleasing from JQ is now firmly on the horizon. It's a clever way to drive down the wages bill and remove conditions that they find costly. And they already have the precedent of doing this with the winding up of AO services (info here (Australian Airlines bites the dust!)) .

You would assume that this is simply a cost saving exercise for Qantas but I wonder if it might affect passengers too? Will JQ-trained crews provide the same level of (grumpy) service when operating QF flights, or will we also see a shift towards a low-cost approach given the crew's LCC training and experience?

I think its inevitable. Alot of people have predicted it will happen. I far prefer the JQ staff to QF anyway, younger, cheerful (not DJ stupid annoying cheerful) and professional.