Qantas to cut domestic capacity amid high fuel prices, staffing issues

Qantas Boeing 737 planes taxi at Kingsford Smith International Airport in Sydney, Australia
Qantas Boeing 737-800 planes taxi at Kingsford Smith International Airport in Sydney, Australia, February 22, 2018. REUTERS/Daniel Munoz
  • Remains on track to report FY23 profit
  • Debt cut to below pre-pandemic levels
  • Jetstar CEO Gareth Evans will leave role in December

SYDNEY, June 24 (Reuters) - Australia's Qantas Airways (QAN.AX) said on Friday that it would cut domestic capacity through March 2023 as it grappled with the higher fuel prices and staffing issues at airports that are affecting much of the industry globally.

The carrier said it remained on track to swing to a profit in the next financial year starting July 1, and had reduced its debt to below pre-pandemic levels, including a A$1.5 billion ($1.04 billion) decline in the last six months as conditions improved.

Qantas has been able to recover the cost of high fuel prices in the international market through higher fares, Chief Executive Alan Joyce said this week, but has been unable to do so in the domestic market. read more

The latest round of capacity cuts for July and beyond will take domestic capacity to 99% of pre-pandemic levels in the first quarter and 106% in the second quarter, Qantas said.

Most of the capacity will be cut from high-frequency routes, the airline said. It comes as the airline's on-time performance levels have been falling and Australian airports have been struggling to secure enough workers after layoffs during the pandemic.

Sydney Airport last week held a recruitment fair in an effort for companies to hire 5,000 needed staff.

Joyce said on Sunday that the airline industry was "rusty" as a result of the hibernation during COVID-19 but he was confident Qantas would be able to fix its issues within a few weeks.

The airline said it planned to give A$5,000 bonuses to up to 19,000 staff when they signed fresh union contracts after a two-year wage freeze during the pandemic.

Qantas also said on Friday that Gareth Evans, the head of its low-cost arm, Jetstar, would step down from his role in December after 23 years with the group.

Investors and analysts had viewed Evans as one of the top contenders to eventually succeed Joyce, who has led Qantas since 2008 and plans to stay until at least the end of 2023.

Several other potential successors have already left for CEO roles elsewhere, in part because of Joyce's unusually long tenure.

Evans will remain with the group to work on key projects before leaving in 2023, the airline said, adding that an internal recruitment process was under way to appoint a new CEO for Jetstar.

($1 = 1.4491 Australian dollars)

Reporting by Jamie Freed in Sydney; additional reporting by Tejaswi Marthi in Bengaluru; Editing by Aditya Soni, Subhranshu Sahu and Gerry Doyle

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Thomson Reuters

Edits stories mainly on business related topics, based in Sydney. Business journalist with 18 years of experience covering primarily the aviation and mining industries at Reuters, the Australian Financial Review and the Sydney Morning Herald.