Nina Mistilis

Qantas has unveiled plans to axe 1000 jobs, retire elderly aircraft, and cut routes. It’s not surprising – Qantas needed to take some action urgently, because it was haemorrhaging money and customers.

Airlines typically have low profits and operate in a highly competitive environment. Given the lessening airline protection in the Australian market, these bold actions are long overdue.

Qantas is to lay off 1000 staff, scrap four Boeing 747s, and defer delivery of the final six A380s by up to six years. It will also scrap the long-haul route to Buenos Aires, while launching Jetstar Japan as a new low-cost carrier, along with another new premium airline based in Asia, with a new name, new aircraft and new look.

It was high time Qantas took action to cut back on unprofitable routes, and take bold action with some of it’s more aged fleet. The Boeing 747s are now getting quite long in the tooth, and they need to be retired and replaced with more fuel efficient aircraft.

Qantas has reviewed its offshore operations to cut costs and unprofitable routes. It will launch a new, premium Asian airline and a Japanese budget carrier – the latter jointly with Japan Airlines and Mitsubishi – flying Airbus A320 jets.

It makes sense for Qantas to look at cheaper more efficient Airbus aircraft, that cost less to run. Qantas plans to acquire up to 110 Airbus aircraft, worth more than $9.4 billion at list prices.

However with the Australian dollar hovering close to parity, the Australian dollar is very high and that deters tourism to Australia, and tourists from overseas flying on Qantas. We have seen more Australian’s wishing to fly overseas for their holidays, but in turn they may be switching from domestic destinations. That is equally going to impact the bottom line at Qantas.

Nina Mistilis is from the Tourism & Hospitality Management Group within the School of Marketing at the Australian School of Business.