Qantas Airways will slash 6,000 jobs, ground 100 of its aircraft for at least a year and raise A$1.9bn ($1.3bn) in equity as the Australian carrier steps up measures to ensure it survives the coronavirus pandemic.
As part of a three-year plan announced on Thursday, Qantas will make more than a fifth of its workforce redundant and furlough a further 15,000 employees as it forecasts a prolonged period of weak demand due to Covid-19.
The development is the latest sign of the drastic action carriers are being forced to take after a plunge in travel demand, with the airline industry forecast to post collective losses of $84.3bn in 2020. British Airways plans to shed almost a third of its 42,000 workforce while US airlines this week have secured $10bn in funding in a bid to bolster their balance sheets.
The job cuts at Qantas, the deepest in its century-long history, reflect a growing realisation that international travel faces a long and difficult path to recovery following the health crisis.
“We have to position ourselves for several years where revenue will be much lower. And that means becoming a smaller airline in the short term,” said Alan Joyce, Qantas chief executive, on Thursday.
Qantas will not resume international flights in any significant way until July 2021, Mr Joyce added, but pointed to recent signs of recovery in its domestic business.
The company will target savings of A$15bn over three years by reducing the frequency of flights, fuel consumption and staff numbers. From 2023 it plans to cut ongoing costs by A$1bn per year through measures including retiring aircraft.
Qantas had previously indicated it would not need to raise fresh equity or accept a government bailout, even as rival Virgin Australia fell into administration. Instead, it raised A$1.5bn in debt secured on aircraft over the past three months.
But Mr Joyce said raising equity from shareholders would enable Qantas to accelerate its restructuring plan. The airline has also asked the government to extend a scheme that pays the wages of furloughed employees until September. So far Qantas staff have received A$400m under the scheme.
Mr Joyce, who has led Qantas since 2008, said he had agreed to a board request to remain as chief executive until the end of 2023. That will make him one of the longest serving leaders in the aviation industry.
He will continue to forfeit his salary in July. Other Qantas executives will receive reduced pay during the month.
Of the A$1.9bn being issued in fresh equity, A$1.4bn is fully underwritten by institutions at a share price of A$3.65. Qantas shares closed at A$4.19 on Wednesday. Rating agency Moody’s said the fundraising would strengthen Qantas’s balance sheet and improve its financial flexibility.
Peter Harbison, emeritus chairman of research firm Capa – Centre for Aviation, said 2021 would likely be even more difficult for airlines than this year.
“When the government support funding and airline capital raisings expire and airline competition resumes in earnest, then the real crunch comes,” he said.
But he added that Qantas was better placed than many airlines elsewhere, as Australia’s domestic aviation market was among the most profitable in the world per capita.