Regional Australians and international travellers expected to feel impact of Qantas cuts

REGIONAL travellers and Australians loyal to Qantas for overseas flights are likely to be the biggest losers from expected cuts.

REGIONAL travellers and Australians who favour Qantas to fly overseas are likely to be the biggest losers from deep cuts to the airline’s fleet and route network expected to be announced on Thursday, analysts say.

Chief executive Alan Joyce is expected to outline plans to save $2 billion over three years when the airline announces a predicted half-year loss of up to $300 million later this week.

Reports indicate up to 5000 jobs could be cut, along with a number of routes, and that ageing Boeing 767 and Boeing 747 aircraft will be retired.

Analysts say the Australian travelling public is likely to feel the cuts most deeply in the reduction or abolition of a number of international and domestic routes.

The Flying Kangaroo’s services to Johannesburg are believed to be under the microscope, while the airline has been forced to deny speculation that it will end Dubai to London flights.

Australian Business Traveller editor David Flynn said it was unlikely the airline would end its remaining European service, as cutting Qantas’ famed ‘Kangaroo Route’ would “almost be tantamount to running up the white flag of surrender”.

However, he said Thursday’s announcement would likely see the end of a range of international and domestic services in an attempt to rein in costs.

“These are bloody hard decisions,” he said.

“Thursday will probably end with a lot of routes being cut and that’ll mean pain for passengers.

“It will just depend on whether they cut them altogether or reduce their frequency,” he said.

Qantas has repeatedly declined to comment directly on what it describes as “speculation” about the details of Thursday’s announcement.

Earlier today, it released a statement in response to the latest reports it was preparing to cull 5000 jobs and sell off its leases on airport terminals around the country.

“We will be making some tough decisions in order to achieve $2 billion in cost saving over the next three years, which is a consequence of an unprecedented set of market conditions now facing Qantas,” the airline said.

“We’ve also said that we must take steps to reduce our costs regardless of whether the Federal Government acts on the uneven playing field in the Australian aviation market.”

As well as international passengers, Mr Flynn predicted regional Australians and business travellers would be hard hit.

He said there was likely to be a reduction in the number of services to destinations outside Australia’s major centres, while other flights could be operated by Jetstar, which does not cater to business travellers.

“Qantas could pull out of a market entirely or substitute with Jetstar or cut back the number of services,” he said.

However, analysts believe that not all Thursday’s announcements will be bad for travellers.

While reducing the overall number of Qantas aircraft, any move to accelerate the retirement of ageing planes such as its Boeing 767s or the 15-strong Boeing 747 fleet will ensure the airline operates the youngest fleet in decades.

“The impact is they will have a relatively young fleet, in fact the youngest in 20 years,” Mr Flynn said.

“And if more of the aircraft are new, it’s better for customers.”

The Federal Government has offered Qantas the prospect of a debt guarantee that would allow the Flying Kangaroo to borrow more cheaply and help it regain its investment-grade credit rating.

However, Prime Minister Tony Abbott late last week said Qantas needed to “get its house in order”.

CAPA Consulting managing consultant Ian Thomas said one of Qantas’ key challenges on Thursday was to “assertively right-size” its network and fleet to ensure they were as efficient as possible.

However, he said this was unlikely to lead to a spike in airfares because of continuing downward pressure on prices from Qantas’ ongoing battle with Virgin Australia for dominance of Australia’s skies.

“It’s still a very tightly competitive market,” he said.

“I don’t think the degree of capacity will greatly change pricing.

“Qantas and Jetstar have to at least match (Virgin), if not better them.”