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Qantas confirmed on Thursday that it will cut 5,000 jobs from its 32,000-strong workforce, after announcing a 252 million AU dollar (224 million U.S. dollar) half- year loss. This will help the flying kangaroo which is battling hard over record fuel costs and foreign low-cost rivals to slash costs by 2 billion AU dollars (1.78 billion U.S. dollars) in the coming three years.
A major union is threatening strike action after Qantas announced its job axing plan. Transport Workers Union national secretary Tony Sheldon has called on the federal government to meet with the airline to find ways of avoiding the job cuts.
"In this country, if the government won't stand up for jobs and for the Australian icon, then we will," he said.
At the same time, Tony Abbott's government is considering changes to the Qantas Sale Act by lifting the foreign ownership limits and other legal restrictions on the company.
"We want to ensure that Qantas management, as far as it is humanly possible, doesn't have any government-imposed ball and chain around their ankles and that's the problem with the Sale Act, " the prime minister said.
"It is a significant restriction on Qantas' freedom of maneuver and that's why the government is considering legislation to establish a level playing field in this area."
Any move on the Sale Act would not pass the current Senate, because both Labor and the Greens have vowed to stymie any such moves in the Senate.
Consequently, Qantas is seeking a debt guarantee from government in order to help raise fund. With so many of its rivals enjoying government ownership and subsidies, it seems quite reasonable for Qantas to do so. But this again is a dangerous idea.
"The debt guarantee is a useful interim measure ahead of changes to the Qantas Sale Act. Yet, if those reforms do not happen, and Qantas's management does not improve, then Australia will be left in the rather unpalatable position of underwriting the airline's debts but having little say in its management," said Dilan Thampapillai from Australian National University's College of Law.
"It might be better to confront the innate suspicion of foreign ownership that exists in some quarters and to allow Qantas to undergo internal reforms in order to remain competitive in the long term," he said.
What happened in Australia's automobile industry already proved that even after injection of billions of tax payers' money, the big car companies still decided to quit manufacturing cars in Australia. Qantas must become competitive and stands on its own feet with its own strengths.
In order to become competitive, Qantas must reform to reduce its high rising costs. With a 32,000-strong workforce, Qantas' total staff costs of about 24 percent of revenue were high compared with Cathay Pacific (15 percent) and Singapore Airlines ( 11 percent), estimated by CLSA analysts.
The analysts said that they were sympathetic to the airline about the foreign ownership restrictions imposed on it and the removal of the act could be a "game-changer" for reducing Qantas' costs.
"It also seems that the offshoring of some jobs within the organization is inevitable. While that is unfortunate, particularly for the workers affected, it will greatly assist in ensuring the long-term viability of Qantas." said Thampapillai.
