Bloomberg News

Qantas Plans to Cut 5% of Cabin Crew After Slowing Expansion

June 03, 2011

(Updates with stock rating cut in fourth paragraph.)

June 3 (Bloomberg) -- Qantas Airways Ltd., facing rising fuel costs and increasing competition, expects to cut about 5 percent of cabin crew in its first buyout program in three years after scaling back expansion plans.

About 350 of the carrier’s 7,000 flight attendants will likely accept a package, the airline said in a statement today. It has no plans for mandatory layoffs, it said. Workers will get three weeks’ pay for every year of service in the first five years and four weeks’ for each subsequent year, the Flight Attendants’ Association of Australia said.

“A lot of workers would look on this in a very favorable light,” said Michael Mijatov, who represents about 3,000 workers as secretary of the union’s international division. “The formula means it is very attractive, if you’re considering leaving or near retirement.”

The Sydney-based carrier, Australia’s biggest, fell the most in almost two months on the city’s stock exchange as it said growth in its international division is “slow” and as Macquarie Group Ltd. cut its recommendation on the stock.

The airline has cut growth plans for domestic and overseas routes this year because of natural disasters, higher fuel costs and rising competition from Emirates Airline and Virgin Australia.

Slow Growth

“Our growth in the international division is slow and uneven rates of growth on different fleets means our crewing requirements are changing,” the airline said.

Jet kerosene prices reached $127.3 a barrel yesterday in Singapore, rising 22 percent this year, Bloomberg data show.

Separately, the carrier’s long-haul pilots are considering their first strike in 45 years to demand more job security and higher pay.

Fair Work Australia, the nation’s labor regulator, today approved a new workplace agreement between Qantas and 7,500 check-in and administrative workers that will include 3 percent annual pay increases over three years.

The airline fell 2.9 percent to A$2.03 at the 4.10 p.m. close of Sydney trading. It has dropped 20 percent this year, compared with a 3.4 percent decline for the benchmark S&P/ASX 200 Index.

Macquarie cut its rating on the stock to “neutral” from “outperform,” becoming the only broker of the 13 tracked by Bloomberg not to recommend investors buy the stock.

“Qantas still looks cheap, however we feel there is no positive earnings momentum at present to reverse the recent share price decline,” Macquarie said in a June 2 report.

Qantas said in March that it will boost domestic capacity by just 8 percent in the six months ending June, rather than an earlier plan for a 14 percent increase. International growth was cut to 7 percent from 10 percent.

The airline also then forecast A$165 million ($176 million) of costs in the period following natural disasters in New Zealand, Australia and Japan, as well as disruptions caused an engine explosion on an Airbus SAS A380 last year.

--Editor: Vipin Nair

To contact the reporter on this story: Robert Fenner in Melbourne at rfenner@bloomberg.net; Nichola Saminather in Sydney on nsaminather1@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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