May 21, 2012 / 3:35 AM / 5 years ago

UPDATE 1-Qantas to cut another 500 maintenance jobs

* To cut further 500 jobs aimed at saving up to A$100 mln/ year

* Move to cost A$50 million

* Qantas shares inch lower in steady broader market (Adds details of plan, share move)

MELBOURNE, May 21 (Reuters) - Australia's top airline Qantas Airways said on Monday it is eliminating 500 jobs by merging maintenance facilities to save up to A$100 million ($98.4 million) annually, as high fuel costs and weak demand take a toll on airline profits.

Qantas, which is emerging from a costly industrial dispute, said in statement it will stop heavy maintenance in Tullamarine in Melbourne and concentrate on centres in Brisbane and Avalon, resulting in the job cuts. It had, in February, flagged another 500 job cuts for the group.

The latest move will save it A$70 million to A$100 million a year but will result in one-off costs of A$50 million, and takes estimated costs of an overhaul plan for the second half of fiscal 2012 to between A$250 million and A$260 million, it said.

The overhaul plan is a bid by Chief Executive Alan Joyce to protect profits and the investment-grade rating of Qantas.

Earlier this month, the airline said it would delay taking delivery of two new A380s to cut capital expenditure by a further A$400 million, raising capex cuts to A$900 million. It is also consolidating engineering, ground and maintenance operations and wants to sell some catering centres.

"Like the manufacturing industry, aviation maintenance is a labour and capital intensive sector," Chief Executive Alan Joyce said in a statement.

"Our cost base in heavy maintenance is 30 per cent higher than that of our competitors - we must close this gap to secure Qantas' future viability and success."

H1 PROFIT SLIDE

The review of heavy maintenance was announced in February when Qantas said its first-half profit halved and follows the introduction of newer aircraft such as the A380 super jumbo and plans for the new Boeing 787s.

"We cannot take advantage of this new generation of aircraft if we continue to do heavy maintenance in the same way we did 10 years ago," Joyce said.

More than 90 percent of Qantas's 30,000-plus employees are in Australia, and employee unions' fears that it will send jobs offshore helped spark last year's bruising industrial battle that led to the grounding of its entire fleet and prompted intervention by Australia's industrial umpire.

Qantas said the latest decision follows a two-month consultation with unions, employees and other stakeholders to discuss the challenges of having three sub-optimal heavy maintenance bases.

Qantas shares, which were marginally higher before the announcement, slipped 0.35 percent to A$1.425 at 0250 GMT. The broader market was 0.2 percent higher. ($1 = 1.0138 Australian dollars) (Reporting by Narayanan Somasundaram & Victoria Thieberger; Editing by Muralikumar Anantharaman)

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