Qantas may be forced to cut flights to New Zealand and Northern Territory

Embattled Qantas may be forced to cut flights to New Zealand and the Northern Territory as part of its $2 billion cost saving drive.

Embattled Qantas may be forced to cut flights to New Zealand and the Northern Territory as part of its $2 billion cost saving drive.

Fly-in-fly-out routes to mining communities could also be on the chopping block as part of a wide-ranging review announced yesterday by the airline, according to Qantas’s former chief economist, Tony Webber.

“I see it as a three-tier thing,” he said.

“The first tier is the mining routes, followed by any routes positively affected or indirectly affected by mining actions, such as those in Queensland and Western Australia.

“The least likely are sun (holiday) routes like Coolangatta, Maroochydore and Cairns,” he said.

Dr Webber, now an associate professor at the University of Sydney Business School and managing director of Webber Quantitative Consulting said it was premature to say whether this would mean cutting the routes altogether or reducing services to save money.

However, he said the airline faces some tough choices as it tries to get back in the black after announcing on Thursday it would slash more than 1000 jobs as it stares down the barrel of a $300 million half-year loss.

“One of the routes that is always really bad recently is Darwin and other Northern Territory routes,” he said.

“They’ve already pulled back considerably but they may pull back further.”

Mr Webber said services to the New Zealand cities of Christchurch and Wellington were also at risk.

The news got worse for the national carrier today as it had its investment grade credit rating downgraded to ‘junk’ status by ratings agency Standard & Poor’s, meaning the airline could face a steep rise in its annual interest bill, higher leasing fees and the loss of investors.

However, Dr Webber said the airline’s poor results were unlikely to result in a rise in ticket prices for the traveling public.

He said while ticket prices were too low, Qantas was determined to retain 65 per cent of domestic market share, and that required it to go toe-to-toe with competitor Virgin Australia on price.

SHOULD QANTAS CEO AND BOARD BE REPLACED?

The Flying Kangaroo has blamed “unprecedented pressures” for its current problems, including an uneven playing field in the Australian aviation market.

Qantas has flagged a number of options to cut overheads and raise quick money, including ending its terminal lease at Sydney Airport.

However, despite speculation this week that Qantas could move to sell its lucrative Qantas Frequent Flyer program, analysts said this would be a last resort.

Pacific Aviation Consulting managing director Oliver Lamb said the struggling airline needed to reconnect with Australian customers outside Sydney if it is to return to profitability.

He said Qantas had made an error by dramatically slashing many of its international services from Brisbane, Melbourne, Perth and Adelaide over the past two years, allowing foreign airlines to capture its market share.

“Qantas has spent a lot of money on ventures in Asia, and Jetstar, at the expense of its international network,” Mr Lamb said.

“They need to grow the international network from Melbourne, Brisbane and Perth – the two are not mutually exclusive.”

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Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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