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The actions taken by Qantas in reducing their costs can be said to be influenced by the global financial crisis, where the decline of the number of passengers in September 2009 was 0.2 percent, in comparison with the previous year. Additionally, the third decline of such indicator as Revenue Seat Factor (RSF), as well as the rising fuels costs marked the beginning of Qantas actions to reduce the costs.
Analyzing the timeline of Qantas’ cost reduction, the first decision made was to discharge a third of its senior executive positions. The aforementioned action was estimated to save the company about A$24 million a year. The effect of such measure was estimated to influence between 60 and 80 executive positions when announced, while the final result affected 90 positions. As of April of this year, the company forecasted missing the 2008-2009 profit by 60-80 percent, where the first half already indicated that the company will report losses for the second half as well. Accordingly, a second wave of cutting jobs was announced, where the company stated that it intends to cut 1750 more positions, among which 500 are managerial, while 1250 are of other staff. Considering the company’s 34,000 employees, the numbers were considerable.
The company followed job cuts with a cancellation of some of their flight destinations and services. The cancellation started from the domestic flights, where 260 domestic flights were canceled, half of which were for the Melbourne-Sydney service. It should be noted that the cancelation of such destinations was not restricted to Qantas’ flights, where other group brands such as Jetstar and QantasLink canceled 200 services as well. Following the drops in demands for the first and business class, as a result of which the traffic declined by 20 to 30 percent, the company started canceling several first-class services on a number of its international Boeing 747 services.This action will mainly affect three routes, which are “Sydney-Buenos Aires, Sydney-San Francisco and Melbourne-Hong Kong-London”.
By August of the current year, Qantas plans took more of formal approach, where cutting the costs took the form of a program titled “Q Future”. In the plans of this program was cutting the costs by “A$1.5 billion over the next three years, starting with a target of A$500 million in the current financial year ending June next year”. The approaches of the program to cut the costs imply increasing the efficiency in areas such as sales, fuel conservation, aircraft utilization and schedule and procurement. In terms of fuel prices, Qantas stated that they are one of its main considerations, where the company keeps monitoring the price level for fuel and oil, and for 2010 already hedged 80 percent of fuel costs. Additionally, Qantas seeks the faster introduction of Required Navigation Performance (RNP), a new navigation system that already saved the company “215,000 kilograms (474,000 pounds) of fuel and 4,200 flying minutes in a two-and-half-year”. With the introduction of the system in wide usage, the company estimated the savings in fuel to be A$20 million a year.
References
Fenner, R. (2009). Qantas Seeks Faster Introduction of Fuel-Saving Route System. Bloomberg.com Web.
Qantas Cancelled. Bernama. 2009.
Qantas Drops First-Class on Long-Haul Routes. Bernama. 2009.
Qantas Passenger Numbers Declining. Bernama. 2009.
Qantas to Axe up to 1,750 Jobs. Bernama. 2009.
Qantas to Cut Costs by A$1.5 Billion. Bernama. 2009.
Qantas to Slash Senior Executive Jobs. Bernama. 2009.
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