Qantas cuts 480 staff as fuel bill rises

Qantas Airways, Australia's biggest airline, will cut as many as 480 Sydney engineering jobs to help meet chief executive Geoff Dixon's A$3 billion ($3.4 billion) cost-saving target.

The airline is closing its Boeing 747 heavy maintenance unit by May and moving some of the work to Victoria and Queensland, Dixon said yesterday.

The decision quelled concern that the airline would shift 2500 wide-body maintenance jobs overseas, where wages are lower.

Restructuring its Australian workforce "had the benefit of significant savings that would make the airline competitive, while preserving a much-desired skill base within the country", Dixon said.

Dixon, 66, is midway through a five-year cost-cutting plan to counter rising fuel prices and increased competition.

Qantas is still considering moving some operations overseas, which may provoke a battle with unions and tarnish the airline's reputation as Australia's national carrier.

Treasurer Peter Costello said he wanted Qantas to consider its ties to Australia.

"The Federal Government has recently made announcements which were of enormous advantage to Qantas," he said. "I expect that Qantas would want to recognise the importance of Australia to its business."

Qantas' fuel bill, its second-biggest expense after labour, rose A$495 million ($560 million) to A$1.3 billion in the six months to December 31. The carrier has said fuel costs may rise A$900 million ($1018 million) this year. Labour costs climbed A$51 million to A$1.7 billion.

Qantas shares rose 3Ac to A$3.97.

The engineering unit, which employs more than 6000 people, accounts for about one-sixth of Qantas' workforce.

Dixon said the job losses could be as few as 340 because the number of positions interstate would probably grow.

The airline is targeting A$100 million a year in savings by restructuring its engineering and maintenance crew.

It is about to begin a six-month review of its Melbourne-based narrow-body service crew and will seek "third-party work within the region" after the entire unit has been restructured.

Other global carriers are cutting jobs to lower costs as fuel prices hover at record highs.

British Airways, Europe's third-largest airline, said three months ago it planned to cut 600 management jobs, or 35 per cent of executives, by next year. Japan Airlines said last October it would cut 100 jobs.

Qantas flagged the plans in October after trimming its management staff by 15 per cent and cutting 60 Sydney-based maintenance jobs in August.

Dixon has said full-year profit won't match last year's record, ending three years of earnings growth.

Qantas employed 35,520 full-time staff at last June 30, 4.9 per cent more than in 2004 and 22 per cent more than five years ago.

- BLOOMBERG