Qantas is cutting 6,000 jobs and raising $1.3 billion to survive the pandemic

Qantas (QABSY) is cutting 6,000 jobs and looking to raise up to 1.9 billion Australian dollars ($1.3 billion) as the carrier fights to survive the coronavirus pandemic.

The cuts announced Thursday account for 20% of Qantas’ total workforce of 29,000 people, according to the company. They will primarily affect the airline’s corporate, ground and flight staff, while another 15,000 workers will remain on furlough “until flying returns,” it added. Jetstar, the company’s budget carrier, will also be affected.

The airline is also making drastic changes to its fleet as part of a broader, three-year plan to help its business recover from the historic slump in global travel. Most of the carrier’s international aircraft — or up to 100 planes — will stay grounded for a year, the company said. Its six Boeing (BA) 747 jumbo jets are also being retired six months ahead of schedule.

The new measures are expected to help the company lower costs by 15 billion Australian dollars ($10 billion) over three years. After that, it’s targeting 1 billion Australian dollars (roughly $686,000) in recurring savings each year.

Qantas 737-800 aircraft parked on the east-west runway at Sydney Airport due to lack of parking on May 20, 2020 in Sydney, Australia.

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Qantas shares, which have fallen 41% this year, were halted from trading in Sydney on Thursday as it made the announcement. Its fundraising plan will involve offering an additional 1.36 billion Australian dollars (about $933,000) worth of shares to institutional investors, at about a 13% discount to the stock’s closing price Wednesday.

The remaining $500 million will be sought through a separate share sale plan offered to existing investors.

To lead the turnaround strategy, CEO Alan Joyce has also agreed to stay in his role through the end of the 2023 fiscal year.

“Right now, all airlines are in the middle of the biggest crisis our industry has ever faced,” Joyce said in a statement. “The impact will be felt for a long time.”

Australia’s Services Union, though, argued Thursday that it was “too soon” for Qantas to slash jobs — and called on both the airline and federal government to protect workers’ salaries.

“This announcement by Qantas is premature,” the group said in a statement. “The Australian economy cannot afford a significant contraction of the aviation industry.”

Joyce said during the company’s announcement that “the crisis has left us no choice.”

“The collapse of billions of dollars in revenue leaves us little choice if we are to save as many jobs as possible, long term,” he said in his statement. “We have to position ourselves for several years where revenue will be much lower. And that means becoming a smaller airline in the short term.”

Travel sector hit

Qantas had already severely slashed its flight capacity as the pandemic wiped out demand for travel. And last week, the airline canceled most of its international flights until October.

Qantas’ main local competitor, Virgin Australia, is also fighting for its life. In April, the Richard Branson-backed airline filed for voluntary administration after failing to receive the government support it asked for. It’s now fielding bids from parties to take part in its restructuring and eventual sale.

News that Qantas is grounding so much of its fleet points to its darkening outlook, even as Australia is being hailed as a potential destination for several proposed “travel bubbles.” Australia’s flagship carrier has said it has flights scheduled “in the coming months” to accommodate a new arrangement to let passengers travel between Australia and New Zealand.

The government of Fiji also announced earlier this week that it was planning to create a travel bubble with Australia and New Zealand.

People sit on a seafront promenade in Barcelona, Spain, Sunday, May 3, 2020. Spaniards have filled the streets of the country to do exercise after seven weeks of confinement to their homes to fight the coronavirus pandemic. People ran, walked, or rode bicycles under a brilliant sunny sky in Barcelona on Saturday, where many flocked to the maritime promenade to get as close as possible to the still off-limits beach. (AP Photo/Emilio Morenatti)

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But “it’s clear that international travel is likely to be stalled for a long time,” Joyce said Thursday. He cited a prediction from the International Air Transport Authority, which has estimated that it could take more than three years for global travel to return to pre-crisis levels.

There is one glimmer of hope: Australia’s domestic travel market is showing signs of life as lockdown restrictions gradually lift around the country. Qantas has said that it is seeing increasing demand for travel within Australia — the company’s domestic passenger numbers within the country doubled last week to 64,000 people.

Authorities in Australia are also expected to lift state border closures next month, which Qantas expects will help boost local travel even more.

“Once that happens, we can get more of our people back to work,” Joyce said.