Qantas will announce massive job cuts on Thursday, possibly in the thousands, despite federal government assistance looking increasingly likely.
The national carrier warned on Tuesday it would still be making tough decisions to cut $2 billion in costs regardless of assistance.
Transport Minister Warren Truss revealed the government was drafting changes to the Qantas Sale Act, which would allow it to be majority foreign-owned.
“The government is philosophically attracted to levelling the playing field,” Mr Truss told reporters in Canberra on Tuesday.
Qantas is struggling with high debt and will announce a large half year loss on Thursday, as the effects of a fare war with rival Virgin Australia, and its cost base disadvantage with state-backed foreign rivals, bite into earnings.
“We have said that we will be making some tough decisions in order to achieve $2 billion in cost savings over the next three years, which is a consequence of an unprecedented set of market conditions now facing Qantas,” the company said.
It is believed the 1000 job cuts forecast by Qantas last December will be significantly increased, as well as its airport leases potentially sold, to help achieve those desired cost cuts.
Qantas has refused to confirm or deny the reports it will slash 5000 jobs.
It warned in December it will post an underlying, pre-tax half year loss of up to $300 million, but one-off costs are likely to weigh even further on its bottom line, with analysts at Morningstar tipping a $438 million net loss.
Unions react to likely job cuts
Unions representing many of the the airline’s 33,000 workers oppose changes to the sale act, as well as a taxpayer-funded government debt guarantee, as it would not change its plans to sack people.
A move to allow foreign ownership above the current 49 per cent cap would only embolden the airline to strip its assets, auction jobs off and cut wages, Transport Workers Union secretary Tony Sheldon said.
We say there needs to be a change at the top of Qantas.
“There should be no change to the Sales Act and no taxpayer underwriting by the federal government until this company comes clean about how they are going to save this airline,” Mr Sheldon told reporters.
Australian Licensed Aircraft Engineers Association federal secretary Steve Purvinas said Qantas management’s strategy of feeding money into failed Jetstar franchises in Asia was its major problem.
“We say there needs to be a change at the top of Qantas or people at Qantas need to change their direction,” he told AAP.
“As long as the board continues its existing strategy to blow money on these failed Asian airlines funded by Qantas’ core business, about 2000 of us (engineers) certainly fear for our future.”
Despite flagging changes to the Qantas Act, the government is not saying whether it will offer assistance in the form of a debt guarantee.
Its support is believed to be dependent on the airline proving it can improve its balance sheet.
The airline’s share price has risen by 16 per cent in the last few weeks, prompting Mr Sheldon to call for a regulators investigation into who was profiteering out of the speculation.
Opposition Leader Bill Shorten asked Prime Minister Tony Abbott in parliament how selling Qantas would stop Australian jobs going overseas.
Mr Abbott said the government wanted the “iconic business” to flourish.
“For that to happen, two things are necessary. First it needs to be able to compete on a level playing field and second it does need to put its own house in order,” Mr Abbott said.
“Qantas is doing its best to put its own house in order and this government will do what it can to ensure it has a level playing field on which to compete. That is the best things we can do for Qantas.”
800 pound gorilla into a Godzilla.
However the amendments are unlikely to pass the Senate before or after July 1 given that Labor, the Greens and the Palmer United Party want Qantas to remain a majority Australian company.
Concerns over debt guarantees
The issue was raised in the coalition’s joint party room meeting in Canberra, where Brisbane MP Teresa Gambaro argued that Qantas should not be offered a government debt guarantee.
She said this would turn Qantas from an “800 pound gorilla into a Godzilla” and make it harder for Virgin Australia to compete.
Australian Greens deputy leader Adam Bandt said his party would not support legislation to provide a debt guarantee unless jobs were protected.
“The Greens won’t be waving it through without looking seriously at how we can protect local jobs,” he told reporters.
Transport Workers Union national secretary Tony Sheldon said Qantas’ management had let down workers with its poor investment decisions of recent years.
“Each baggage handler, check-in staff and ramp worker generates a $205,000 return to Qantas above the cost of their employment,” Mr Sheldon said.
“Sacking them is like a tradesman selling his tools to pay a one-off bill.”
Qantas declined to comment on its plans before Thursday’s half-year results announcement.
However, it said it would be making some tough decisions as part of a cost-cutting program.
An Essential Media Communications poll released on Tuesday found 52 per cent of voters opposed increased foreign ownership of Qantas.