Qantas Airways plans to slash the cost base of its ailing international business by nearly one-third over the next three years, in a move that has sparked speculation of further capacity cuts and job losses.
Qantas chief financial officer Gareth Evans this month revealed “$1 billion or thereabouts” of the company’s $2 billion cost savings target would come from its international division.
Analysis of Qantas accounts shows the overseas division had controllable costs of $3 billion last year, excluding fuel, depreciation and operating leases – suggesting one-third of these would need to be cut to meet the company’s financial targets.
Qantas expects inflation will erode some of the cost savings, meaning $1 billion of cuts to international would equate to actual cost cuts of about $730 million by the end of the third year.
An analyst said he struggled to comprehend how Qantas could cut $1 billion from its international division without further route withdrawals and job cuts, even though the airline has so far played down the prospect of more wholesale network changes.
“They will probably announce they will cut another 2000 or 3000 [jobs] on top of the 5000 already announced,” the analyst said.
Speaking at the CAPA Australia Pacific Aviation Summit, Mr Evans argued the cost savings could be made without sacrificing customer services.
“For us, it’s about controlling what we can control, and pulling out $1 billion worth of costs [and] continuing to improve the network and the product quality for our customers is absolutely what we can control,” Mr Evans said.
Qantas, including Jetstar, has a total controllable annual cost base of $11.6 billion, so the planned cuts will hit the international division disproportionately.
Of the $2 billion target for the business as a whole, Qantas has said it will cut $800 million from its cost base by June next year and the other $1.2 billion of savings are expected over the following two financial years.