Australia’s biggest airline, Qantas, is cutting jobs and reducing services in response to spiralling fuel costs.

Qantas says its fuel bill will jump by more than two-billion dollars next financial year.

It says it’s failing to bridge the widening cost gap, despite fuel surcharges, fare increases, a fuel hedging strategy and a recruitment freeze. It’s now decided to cut capacity on its routes by five per cent, the equivalent of grounding six aircraft.

It will retire, ground and cancel the delivery of aircraft to achieve that. Qantas will abandon the Gold Coast to Sydney and Ayers Rock to Melbourne routes.

Jetstar will exit a number of routes and reduce services on others.

Changes to international routes will be finalised within the week.

The airline’s chief executive officer, Geoff Dixon, says the magnitude of the changes will require a reduction in staff numbers.