Qantas Cuts Capacity in Response to Oil Prices

[Deni G]

Sorry only version of press release I could find.

Source asx.com.au

http://www.asx.com.au/asxpdf/2008052...31g5wnckkp.pdf

[Sarah C]

This big news out of that is:
- Accelerating retirement of the 743 to December - not surprising
- Retiring one 737 (734 I believe)
- Grounding two 767 and one JQ 320 (wonder which two they will ground)
- Cancelling delivering of an A321.

Some big decisions made given the price of fuel

[Michael Morrison]

JQ axe ADL-MCY, BNE-HBA and SYD-PPP as well as reduce AVV/ADL/CNS flying

QF axe MEL-AYQ and SYD-OOL and reduce SYD-AYQ

[Rhys Xanthis]

wow, i must say i wasnt expecting anything as serious as grounding to 767's and canning an a321 order, ground a320...surprising.

not so surprising is the exit from sydney-ool, but it makes it that much harder for pax travelling via syd to ool from per...re check ins make me angry

edit: i bet virgin is grinning from ear to ear...e-jets are ready to shine in a BIG way.

edit2: could we perhaps see some different routing arrangements for aircraft (744) going to europe? perhaps terminating at SIN, getting some a333's pronto?
perhaps qf axe lax-jfk route?
rethink its syd-scl route?

[Chris Tully]

Media Release:

QANTAS CUTS CAPACITY IN RESPONSE TO FUEL PRICES


SYDNEY, 28 May 2008: The Qantas Group today responded to continuing high fuel prices by announcing a range of cost saving measures including the cancellation of five per cent of Available Seat Kilometres (ASKs) – the equivalent of grounding six aircraft.

The Chief Executive Officer of Qantas, Mr Geoff Dixon, said Qantas’ fuel bill would increase by more than $2 billion in 2008/09, representing around
35 per cent of the company’s total expenditure.

“The fact is that fuel prices are something we have no control over, so we have to look harder at areas where we do have control,” Mr Dixon said.

“Despite our fuel hedging strategy, fuel surcharges, two separate
across-the-board fare increases and a recruitment freeze, we are not bridging the widening gap between the actual increase in the cost of fuel and the amount we offset.”

Mr Dixon said the Qantas Group would manage the reduction in ASKs by:

retiring one B737 aircraft;
grounding two B767 aircraft and one Jetstar A320 aircraft;
cancelling the delivery of one Jetstar A321 aircraft;
accelerating the retirement of its four B747-300 aircraft, currently
operating trans-continental services to Perth, by December; and
adjusting the flying patterns of other aircraft, including reducing the
utilisation of the B747-400 fleet.

“This will enable us to make significant changes to domestic and
international flying for both Qantas and Jetstar. In some cases, this will involve pulling off routes entirely. In other cases, we will scale back frequencies and capacity.”

In the domestic market, Mr Dixon said:

Qantas would exit its Gold Coast-Sydney and Ayers Rock-Melbourne routes
and reduce Ayers Rock-Sydney services from August;
Jetstar would exit its Sydney-Whitsunday Coast, Adelaide-Sunshine Coast,
and Brisbane-Hobart routes from July; and
Jetstar would reduce services on some Adelaide, Avalon and Cairns routes
by August.

“Wherever possible, we have tried to minimise the overall impact of the changes. For example, Jetstar will continue to offer more than 140 return services to the Gold Coast each week, including up to 10 services a day on the Sydney-Gold Coast route.

“The Qantas Group, through Jetstar, remains the largest carrier in and out of the Gold Coast.”

Mr Dixon said Qantas was finalising details of its international network restructure, including capacity adjustments and market exits, and would announce these within the next week.

“Qantas remains a fundamentally strong company, with a good balance sheet and a commitment to investment that includes a $35 billion order for aircraft,” Mr Dixon said.

“We must make these hard decisions now, however, if we are to ensure the ongoing strength of Qantas, preserve the jobs of the vast majority of our current workforce, and position ourselves for growth when the trading environment improves.”

He said that the magnitude of the changes would require a reduction in staff numbers.

“This week we will launch an accelerated leave program to mitigate the requirement for redundancies, but it is inevitable that a reduction in staff numbers will be necessary in selected parts of our business,” Mr Dixon said.

“As always, we will communicate with our people. In the first instance, redundancies will be carried out on a voluntary basis.”

Mr Dixon said that in addition:

the pay for all of the company’s senior executive group would be frozen;
and
the normal July pay review for the remaining 1,000 executives would be
deferred.

He said passengers affected by the schedule changes would be contacted to discuss alternative arrangements.

[Michael Morrison]

Any bets JQ will drop some Japan routes with the announcements next week?

perhaps free up a 332 to replace QF on MNL/HNL totally or some NRT services from say PER?

Axing of SYD-CHC (mostly LCC's at CHC these days?)

[Andrew P]

Originally Posted by Rhys Xanthis

edit: i bet virgin is grinning from ear to ear...e-jets are ready to shine in a BIG way.

guess they are in a much pain as QF is in with the fuel prices, so will be interesting if they follow along a similar vain.

Banjo

[Rhys Xanthis]

Originally Posted by Michael Morrison

Any bets JQ will drop some Japan routes with the announcements next week?

perhaps free up a 332 to replace QF on MNL/HNL totally or some NRT services from say PER?

Axing of SYD-CHC (mostly LCC's at CHC these days?)

well nrt services are operated by 767 from perth now, so its well possible.

i wonder how service loads to singapore are going? 3 daily with singapore, soon to be 2 with tg, 2 x daily qf with a 3rd via denpasar/jakarta some days. although i guess its used for passage to europe mostly.

perhaps we see a 744 going 1 x daily on this route in the future? although the a333's are on pretty weird rotations i think (from singapore and hkong)

[Greg F]

DJ would be feeling the exact pain as the QF group.

The E-Jets are no more economical than a 737 or A320, if infact I would have thought worse.

also on the Tiger front I read somewhere with a big boss saying ' Tiger Australia is traveling reasonably well ' which isn't that convincing...

Seems that the Oil price issue is hurting Aussie Airlines badly.

[Brenden S]

Oil is hurting everyone around the world, that is what you pay with china and India consuming more.