Qantas Airways has set a five-year target to return its struggling international operations to profitability.
The airline announced on Tuesday it was cutting some long-haul flying, deferring orders of its Airbus A380 superjumbos and confirmed it was looking to set up a new full-service premium carrier in Asia.
As part of the restructure, the Flying Kangaroo will cut 1,000 jobs, including pilots, cabin crew, management and engineering staff.
Chief executive Alan Joyce says the airline’s international operations are losing market share and suffering financial losses, with 82 out of every 100 Australians choosing to fly on its competitors when heading overseas.
“We don’t have the option of pretending things will change if we stay the same. They won’t,” he told reporters.
“To do nothing, or tinker around the edges, would only guarantee the end of Qantas international in our home Australian market.”
“That would be a tragedy.”
One of the biggest changes is the plan to establish a new premium airline in Asia.
While details such as name, location and routes remain under wraps, Mr Joyce did say it will be minority owned, start with 11 narrowbody Airbus A320 aircraft and Kuala Lumpur or Singapore are two of several potential bases.
The aircraft configuration was understood to feature lie-flat business class seats and a premium economy style product in the rear of the cabin.
It was also suggested this lower seat density meant the A320 would be able to operate flights to and from Australia from where ever the new airline was based.
While it won’t carry the Qantas name, the proposed airline would “leverage all our Qantas know-how”, Mr Joyce said.
“Our ability to participate profitably in Asia, with this huge growth, is something every Australian should be proud of because it shows Qantas is leading the way in aviation, still after 90 years,” he said.
Meanwhile, the route changes were designed to enhance Qantas’s relationships with Oneworld alliance partners such as British Airways and LAN Chile.
Qantas says it will stop flying to London from Bangkok and Hong Kong in early 2012 and instead rely on a codeshared British Airways’ services on those sectors.
At the same time, it will consolidate all its flying to the UK capital via Singapore, offering daily services with its Airbus A380 superjumbos from Sydney and Melbourne.
And in South America, Qantas will drop Buenos Aires in favour of LAN hub Santiago.
Despite much speculation, other Qantas destinations thought to be under consideration to be dropped, such as Mumbai, Manila and New York, were maintained.
The airline said in June the international operations were expected to post a before tax loss of $200 million in 2010/11.
“The consolidation will immediately reduce losses and could in the long-term see yield increase unless competitors pick up on the lost traffic,” the Centre for Asia Pacific Aviation said in a research note.
“There are still some major areas of detail to work through, but the foundations have been set for a new, more focused international business to emerge.”
Qantas also announced what it said was the largest aircraft order in Australian aviation history – firm orders for 106-110 narrowbody Airbus A320s, plus 194 purchase rights and options.
The new planes are planned for Jetstar in Australia and New Zealand, Asia and the new domestic operation in Japan in partnership with Japan Airlines and Mitsubishi Corporation.
And in a further fleet reshuffle, Qantas says it will defer delivery of six A380s until 2018/19 after it receives the 12th double-decker airframe in mid-2013.
Qantas says the cost of the transformation plan is still being assessed.
Qantas shares closed down half a cent at $1.525 on Tuesday.
