Qantas to cut 5,000 jobs in A$2bn cost-cutting move

The 'Flying Kangaroo' has been battling headwinds in its domestic market against rival Virgin Australia

Struggling airline Qantas has said it will cut 5,000 jobs, after reporting a heavy financial loss.

It is part of the Australian carrier's plans to reduce costs by A$2bn ($1.8bn; £1bn) over the next three years.

The cuts were announced alongside an underlying pre-tax loss of A$252m for the six months to the end of December.

The airline, which also plans to reduce its fleet by more than 50 aircraft, said it faced tough competition in both international and domestic operations.

Qantas chief executive Alan Joyce said he would be discussing the job cuts with trade unions on Friday.

In addition to the redundancies, the airline will also be making changes to its fleet.

At a press conference following the earnings results, Mr Joyce said Qantas would defer eight remaining Airbus A380 aircraft on order.

It will also defer the receipt of three Boeing's 787 Dreamliner jets which had been ordered for its budget arm Jetstar.

In a statement, Qantas chief executive Alan Joyce said the airline was facing "some of the toughest conditions... it has ever seen" and that it needed to take actions "unprecedented in scope and depth" to cope with changes in the Australian aviation industry.

Turbulent times ahead for Qantas

Qantas has been trying to convince the Australian government that it deserves financial backing, and that rules limiting foreign ownership of the airline to 49% should be relaxed to encourage overseas investment.

It claims it is at a disadvantage because domestic rival Virgin Australia is largely owned by three government-backed operators - Air New Zealand, Etihad and Singapore Airlines.

"The Australian domestic market has been distorted by current Australian aviation policy," Mr Joyce said.

"Qantas has been undertaking its biggest ever transformation over the past four years, cutting comparable unit costs by 19%, but this is not enough for the circumstances we face now."

The airline's shares sank by as much as 7% at the start of trading in Australia after the earnings announcement was made, and closed down 9% at A$1.16.

The airline warned in December that losses in the first half could reach A$300m, citing "immense challenges" from record fuel costs, a strong Australian dollar and fierce competition.

Not long after that earnings alert, two ratings agencies - Moody's and Standard & Poor's - downgraded the airline's credit rating to below investment grade.