Qantas has announced that it will slash 5,000 jobs, defer aircraft deliveries and slow the growth of its Jetstar businesses in Asia after revealing a A$252 million ($226 million) underlying loss before tax for the first half of the 2014 financial year.
The loss came as revenue slipped 4% to A$7.9 billion, while expenses increased by 2% to A$8 billion.
Qantas blamed the fall in revenue on massive capacity growth in both its international and domestic markets, as well as lower demand caused by the slowing of the Australian economy.
“It’s clear that the market Qantas operates in has changed, with structural economic shifts exacerbated by an uneven playing field in Australian aviation policy,” said chief executive Alan Joyce.
By segment, Qantas Domestic saw its underlying earnings before interest and tax (EBIT) fall from A$218 million for the first half of 2013 to A$57 million, which it largely blamed on competitor Virgin Australia’s capacity growth in the market.
The airline’s international business saw its underlying EBIT loss jump from from A$91 million in the previous corresponding period to A$262 million.
For the first time, the Jetstar group reported an underlying EBIT loss of A$16 million, compared to a A$128 million profit over the same last year. Qantas says that competitive pressures, particularly in Southeast Asia, and a A$29 million share of losses from its Asian associates dragged down the result, although Jetstar’s domestic business remained profitable.
Qantas Loyalty continued its underlying EBIT growth trajectory, increasing earnings by A$9 million to A$146 million.
The airline’s freight operations saw underlying EBIT halve to A$11 million as global weakness in air cargo markets took its toll.
In response to the losses, Qantas will undertake a A$2 billion cost cutting programme, which will result in the loss of 5,000 jobs at the carrier by the 2017 financial year. The airline will also retire and defer deliveries of 50 aircraft, which will affect deliveries of Boeing 787-8s for Jetstar and its final eight Airbus A380s.
Qantas says that it will also suspend the growth of Singapore based Jetstar Asia, but will continue to support its investments in Jetstar Japan and Jetstar Hong Kong.
The carrier has also agreed to sell the lease on its Brisbane terminal to Brisbane Airport Corporation for A$114 million, and will also look to sell its Melbourne and Sydney terminals.
Qantas also left the door open for further asset sales as it continues to review its portfolio, and says it will “update the market as and when required.”