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Airlines set to ground flights, jobs  Feb 17, 2009

As many as 400 jobs could go at Australia's second largest airline, Virgin Blue, after it revealed plans to ground up to five aircraft in response to the global economic slump.

Qantas has also announced cuts to its international services, and Australians have been warned of an end to heavily discounted domestic fares as the aviation industry braces for a massive downturn.

In a statement to the Australian Securities Exchange yesterday, Virgin Blue said it would take up to five aircraft out of service in the 2009-10 financial year and use them as operational spares. The move will reduce the airline's capacity by about 8 per cent and affect up to 400 full-time equivalent positions. However, Virgin says it will consider transferring staff to its new long-haul carrier, V Australia, offering part-time work, job sharing and leave without pay.

Managers are being asked to look at the scope for staff cuts. But it is believed that Virgin will not completely withdraw from any routes.

In a memo to staff yesterday, Virgin Blue chief executive Brett Godfrey said the airline would move into "safe and secure mode" for the next two years. He was not pessimistic but pragmatic about the downturn.

In December, Mr Godfrey warned staff that the airline was carrying too many employees but advised against listening to "media speculation" on job cuts.

Yesterday's announcement followed Mr Godfrey's warning on Monday that a reduction in capacity could see the end of heavily discounted fares. "At the moment we're very happy to discount, but the discounted fares out there will be difficult to sustain with the level of capacity that we have."

Potentially adding to its woes, Virgin's new international carrier, V Australia, will take off on its first commercial flight next week.

The drop-off in business travel has led Qantas to cut its services into China and to relaunch its domestic operations in New Zealand using its budget carrier Jetstar.

Qantas' Melbourne-to-Shanghai and Sydney-to-Beijing services will be cut within months following a 20 per cent decline in business travel since October. A new daily service from Sydney to Shanghai, to begin from March 31, will aim to pick up the leftover demand. Qantas has also scrapped direct flights from Australia to Mumbai from May, with India-bound flights now to depart from Singapore.

Qantas chief executive Alan Joyce told The Age that the company's New Zealand domestic services would be transferred to Jetstar from June 10 in a bid to lower costs and provide cheaper fares.

"We were seeing our performance as a loss-making exercise in the domestic New Zealand market," Mr Joyce said.

"There have been occasions where we have dipped into profits just to keep it running. We felt the best way of making a return and the best way of being very competitive in that market was to focus on Jetstar rather then share the market with Qantas. The Jetstar experience has worked on Christchurch to Australia. Qantas was underperforming on that route and now Jetstar is performing very well on it."

The news from the Australian airlines came a day after Singapore Airlines confirmed it would cut capacity by 11 per cent from April. It will also decommission 17 planes.

Airlines set to ground flights, jobs

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