Qantas sheds 2000 positions

[damien b]

From news.com.au

QANTAS will slash about 2000 jobs next week as the national carrier seeks to offset cost pressures caused by the crippling fuel crisis.

The belt tightening also will include cutting loss-making flight routes from both domestic and international schedules.

The economic situation confronting the airline is so grim senior managers, flight crew, engineers and ground staff will be included on the hit list.

The cuts are expected to affect 5 per cent of the carrier's 36,000-strong worldwide workforce.

Qantas chief executive Geoff Dixon told workers this week rocketing fuel prices had changed forever the way Qantas did business.

Qantas last month pruned about 100 staff, cut services and agreed to retire four aged 747 jumbos.

Since then, the cost of refined jet kerosene has leapt even higher on the Singapore index, the benchmark for Asia-Pacific airlines, from $US171.45 a barrel to the July 3 record of $US181.43.

Jet fuel yesterday traded at $US175.25.

The fact fuel continues to hover above $US170 a barrel means the Qantas and Jetstar fuel bill will double to more than $2 billion this financial year.

Next week's cuts come as the airline and the International Airline Pilots Association agreed to a new pay deal that will hand long-haul pilots an annual 3 per cent pay rise, plus a 1 per cent increase in company superannuation contributions each year for the next five.

The pay deal is expected to put pressure on the airline's 1500 engineers, who have taken industrial action in support of a 5 per cent pay rise, which Qantas argues is outside its wages policy.

"The overall view of our industry is dire," Mr Dixon said.


No surprise really considering the current climate. I believe more jobs will follow soon, particularly workshop engineers, some training staff and associated management as they can be outsourced at cheaper rates.

[NickN]

Gotta feel sorry for them.

Someone really has to re-invent the way oil is priced. The speculative way with which traders currently bargain needs to be shed. After all, why should an argument between the US/Israel and Iran be reason to up the prices. (This was one of the latest reasons for the price going up). Nothing has even happened yet!

Unless something physical happens to actually affect prices I can't see any reason why they should continue to rise. I understand some nations are unable or unwilling to increase output but that makes sense at least. People are willing to understand that. But not speculation from traders as to what MAY happen.

[ChrisG.]

Nick, unfortunately the producers of oil can do whatever they please with the price of oil. It is, after all, their product.

Chris

[damien b]

Nick, unfortunately the producers of oil can do whatever they please with the price of oil. It is, after all, their product.

Chris


It's not the producers who are setting the price but the market. Supply currently exceeds demand and the price shouldn't be anywhere near the $140+ that it currently is. OPEC feel its price is more likely in the $70 a barrel range. It is speculators who are driving the market price on a possible/maybe event like an US/Iran war.

[NickN]

Exactly my point. Speculation is hurting the oil price and those responsible for the practice are doing nobody any favours! The prices should be tied to real events and tangible happenings not some traders idea of what may or may not eventuate.

[David Ramsay]

Reality check, Nick ... that ain't how the market works.

[NickN]

I understand thats now how it works but the way it works now doesn't seem to be helping anybody.

What would you do if groceries were traded the same way as oil, and someone popped up one day and started screaming a plague of locusts might be coming and groceries went up to double the price when no locusts had even been spotted?

[ChrisG.]

Maybe you should become a market analyst then Nick. We'll see how long you last, :cool:

[Philip Argy]

I understand thats now how it works but the way it works now doesn't seem to be helping anybody.

What would you do if groceries were traded the same way as oil, and someone popped up one day and started screaming a plague of locusts might be coming and groceries went up to double the price when no locusts had even been spotted?

The law of supply and demand is what determines price - it's Economics 101. The interesting issue is what causes the demand, and the key issue in the debate is that people are buying oil who don't actually need oil but are buying it in the hope of being able to re-sell at a higher price. Whilst a fraction of those buyers are legitimately fearful of some disruption to oil supplies down the track, it's clear that most are just investors who treat oil as any other tradeable commodity.

If you look at commodity markets people are doing just as crazy things with orange juice, sugar, soy beans, wheat, and you name it. The locust plague 'scare' could well drive up the price of farm produce and encourage people to start buying it even though they didn't need it, in the hope they could resell it at a profit.

There are policy considerations about free markets etc that are worth discussing although YSSY is probably not the ideal 'venue'.

[Andy N]

I see oil prices are in freefall at the moment, I suspect they will be back down to around $100 by the end of the year as more and more people start to look elsewhere for fuel.

[Russell D]

Nick, unfortunately the producers of oil can do whatever they please with the price of oil. It is, after all, their product.

Chris

Exactly my point. Speculation is hurting the oil price and those responsible for the practice are doing nobody any favours! The prices should be tied to real events and tangible happenings not some traders idea of what may or may not eventuate.

Well essentially, if you are an oil producer or even a speculator for that matter), and with so much power to raise prices without anyone really being able to stop you, why would you give a stuff about anyone else who really feels the pinch? I mean, as long as you would be making a profit you really wouldn't care about anyone else.

On another note, using textbook economics, it will be interesting to see which airlines can survive (obviously those who are the most efficient who can remain competitive in the market). QF should be able to hold up fairly well and outlast most of the other competitors I imagine (its most likely got the best economies of scale of all Australian domestic airlines considering its size), however, following the shock collapse of Ansett, I guess anything can happen.

Just makes me wonder how organisations such as the RFDS are coping with the rising price of fuel, as most of their funding comes from donations. Combine the rising price of fuel, less donations as a result of tighter household budgets, and the acute shortage of doctors throughout Australia, they must be feeling some pressure.

[Paul Waters]

Russell, RFDS is majority funded by the respective state and federal governments. While rising prices of fuel do effect their operating costs, it doesn't hurt them as much as it would most operators.

The price of oil was in free fall about 6 weeks ago as well, didn't take long for it to rise $15 in a couple of days.

Paul

[Rhys Xanthis]

I think if Qantas really start to feel the pinch, a very easy step could be made to decrease frequencies on some major routes. While obviously not a favourable option, I am sure that if it got really serious, they would look very hard at such an option.

[damien b]

I'm wating for prices to start to move back towards what we saw in the old Ansett/Qantas/Australian Airlines days. It would make flying expensive for many but at the end of the day people who need to fly will, those who only do now because its cheap will once again look elsewhere or fly less. Airlines can only cut back so much in staff before they either shed routes or increase prices, and not just the fuel levies.

I recall flights from Syd to Adelaide return, being up around $600 in the 90's, whilst now they are around the $290 mark. Even an increase to $400 would be fine by me and it would give all airlines a bit of breathing space. Low cost airlines and high fuel prices don't mix too well.