Qantas cutting jobs: the worst is yet to come for the Australian economy


Qantas is laying off 6,000 employees and immediately retiring all of its 747s, which is expected to shake the Australian economy. The Flying Kangaroo gave us a glimpse of the future.

Other jobs will be cut as companies understand the new reality. Qantas’ layoffs take a long time in a day, but in the rest of the economy, there will be worse to come.

In addition to 6,000 layoffs, Qantas is cutting 15,000 employees. Half of them are suspended until international flights resume, which means years of work for some employees. They are allowed to hold other jobs during their resignation and will continue to accumulate Qantas leave. However, it would be foolish to assume that these people will all stay in the business, so the job loss could be even higher than 6000.

It takes time for a business to even recognize the extent of the changes required. Qantas actually acted fairly quickly. Eliminating a huge chunk of its workforce and raising almost $ 2 billion takes time. It is a process that requires many lawyers, bankers, internal meetings and board meetings.

One of the reasons why Qantas could be so fast is that the impact on aviation is clear. At the time of this writing, Qantas had only six planes in flight over Australia. Six. For a company with 29,000 employees.

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The magnitude of the problem in aviation is obvious. This is also the reason why Virgin was so quick to enter the administration. For the other sectors, the medium-term challenges continue to focus slowly. Commercial real estate, retail, public transport and hotels all have their days to come. When the writing on the wall becomes readable, it does not contain good news.

The IMF now claims that the pandemic has hit global growth harder than expected and that the expected rebound will not go as planned.

“The recovery should be more gradual than expected,” the Fund wrote in its World Economic Outlook, published on Thursday.

All of these percentages appear sharp on the page, but in real life, they represent disorder and despair. This means lost jobs, bankrupt businesses, homes sold in declining markets, declining mental health, and ruined families. This is why the economy is important.

The frustrating truth is that Australian growth depends on global growth. We are a trading nation and we need the rest of the world to be in good shape to get out of it.

Instead, the rest of the world is sick. America in particular seems to be giving in to COVID-19. The virus is on an upward trajectory in this country, and there are few signs that the United States can act together in time to avoid a second peak of infections.

China, our long-standing economic engine room, is growing, but very slowly by its standards. And he is experiencing a second wave of infections in his capital, Beijing.

With us, we did not get out of the wood either. A small anomaly in the Victoria cases could quite easily turn into a second peak. A second domestic wave would really crush Qantas.

CEO Alan Joyce has essentially abandoned international flights – Qantas expects the number of international flights to be less than half of what they were until 2022. But the company still has hope for them domestic flights.

“We plan to resume 40% of our domestic flights before the crisis in July and hopefully more in the months to come,” said Mr. Joyce. But a rebound in domestic travel depends on the good fight against the virus.


Qantas International will be a shell of its former self for some time. Domestic Qantas could rebound if they are lucky. What about the Qantas Frequent Flyer?

What is funny with Qantas in recent years is that it benefits more from its loyalty program ($ 200 million in the first half of this year) than international flights ($ 160 million).

Australians are obsessed with point programs in general and the Qantas Frequent Flyer program is dominant. At least half of all Australians – more than 13 million of us – are part of the program.

So if we don’t fly frequently, what happens to frequent travelers? Not that much, it turns out. The benefits of this program are expected to drop only 5-10% from the previous year. It’s something Qantas has in mind.

The strength of loyalty programs is also an interesting footnote in the history of Virgin Australia. The company had a program called Velocity, and it was so successful that they were able to complete it for $ 335 million. But their feet were cold and just before going bankrupt, the company spent $ 700 million to buy it back.

Qantas’ signals today are a bad sign for Virgin. Qantas says there isn’t even room for a large airline on the market in the next few years. How can there be room for two competitors?

Virgin administrators are working to finalize the sale of the airline as we speak. Hopefully they will succeed, otherwise there could be even more jobs lost soon.

Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.


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