Australian flag carrier Qantas Airways will be outsourcing over 2,000 ground staff positions to reduce its financial losses.
Qantas will undertake the outsourcing on top of the previously announced job cuts of 6,000 employees earlier this year to avoid further losses. According to the airline, the coronavirus pandemic and the ensuing border restrictions resulted in a $2 billion loss.
Losses and job cuts at Qantas
In August, the airline reported an almost $2 billion loss and announced planned job cuts as a result.
Qantas Group chief executive Alan Joyce claims that trading conditions are the worst in the airline’s 100-year history. He argued: “The impact of Covid on all airlines is clear. It’s devastating and it will be a question of survival for many. Recovery will take time and it will be choppy.”
Joyce also warned that he expects the airline to experience a “significant underlying loss” in the next financial year.
According to Qantas, most of the current year’s loss is attributed to writing down the value of assets and redundancy payments.
As Australia’s international borders remain closed and are not expected to reopen soon, the Sydney-based carrier said it also does not expect to resume international flights until July 2021 at the earliest, with the possible exception of flights to New Zealand.
Prior to this, Qantas announced in March that it will be reducing flights as well as executive pay as part of its cost-cutting measures amidst the coronavirus outbreak.
As part of the initiative, Joyce will forgo a salary while Chairman Richard Goyder will stop taking management fees. Also, the executive leadership team will take a 30% pay cut.
Most of the canceled flights will be in Asia, where the coronavirus outbreak originated and remains rampant. Flights in the region have been cut by 31% while capacity will also be reduced in the US and UK.
Qantas also mentioned that its budget airline, Jetstar, will also “make significant cuts to its international network.” The total reduction in flights represent a 23% decrease in overall capacity for the carrier.
Andrew David, the airline’s domestic and international chief executive, said: “Unfortunately, Covid has turned aviation upside down. Airlines around the world are having to make dramatic decisions in order to survive and the damage will take years to repair.”
Cost reduction through outsourcing
The Australian carrier is expecting to save approximately $74 million annually, based on pre-Covid levels of flying, by outsourcing to third-party providers instead of handling its own ground services.
The firm is also hoping to lower its costs by $59 million over five years by not spending additional money on ground handling equipment, including aircraft tugs and baggage loaders.
Qantas employees who will be affected by this move will be receive a redundancy package and given support to transition to new jobs.
While domestic flights have started to recover due to the lifting of interstate travel restrictions, Qantas is still forecasting further losses next year due to a $7.4 billon decline in revenue.
Aside from losses and lower revenue, the airline has also taken on an additional $1.1bn debt in order to maintain its operations. The International Air Transport Association (IATA) also expects airlines globally to lose $157 billion this year and in 2021.