UPDATE 1-Qantas to release review outcome next week

(Recasts with Qantas response)

SYDNEY/CANBERRA, July 17 (Reuters) - Qantas Airways Ltd (QAN.AX), Australia's biggest airline, said it would make an announcement next week about the outcome of its operational review, following press reports it would sack 2,000 staff.

The carrier, under pressure from soaring fuel costs and strikes over a pay dispute with its engineers, would slash 5 percent of its 36,000-strong workforce, as well as unprofitable routes into Asia and at home, the Telegraph newspaper said on Thursday.

"The announcements are relating to the review of the operation of the entire Qantas Group, and we will be making that announcement publicly next week," a Qantas spokesman said.

Qantas shares were up 4.1 percent in Thursday trade, outpacing a 0.8 percent rise in the benchmark S&P/ASX 200 index .AXJO. The shares are still down about 40 percent this year, nearly double the drop in the benchmark index.

Flight crew, managers, engineers and ground staff would all face the sack after Qantas Chief Executive Geoff Dixon last month warned rocketing fuel prices had sparked the "greatest crisis in aviation history", prompting the review of operations.

Qantas, the world's 10th-largest airline by market value, reported net profit of A$617.6 million ($605 million) for the six months ended December, doubling its first-half earnings on strong demand for air travel and trimmed fuel costs.

It said in May it still expected to achieve its target of 40 percent profit growth in the current year.

But in the same month, ratings agency Standard and Poor's revised its outlook for Qantas to negative from stable, reflecting pressure on the carrier's cash flow from a fuel bill expected to rise by $2 billion in 2008/09 with jet fuel hovering around $175 a barrel.

Qantas is also refusing to budge in a long pay dispute with engineers demanding 5 percent wage rise and has been forced to cancel more than 200 domestic flights over the last month.

That dispute could worsen after the airline and the International Airline Pilots Association agreed this week to give long-haul pilots a 3 percent pay rise, tied to a 1 percent lift in yearly company pension contributions for five years.

Dixon told staff the fuel price crisis exceeded the impact of the two Gulf wars, the September 11 airline attacks on the United States in 2001, Asia's Severe Acute Respiratory Syndrome, or SARS, crisis and past oil shocks.

The spokesman said Dixon issued a memo to staff saying that an announcement will be made next week. "That is all the memo says," he said.

To contain costs, Qantas is looking to permanently move many critical maintenance jobs offshore by employing engineers in London and the United States.

"The overall view of our industry is dire," Dixon said, according to the Telegraph. ($1=A$1.03) (Reporting by Denny Thomas and Rob Taylor, editing by James Thornhill)