Qantas to curb flights, cut management jobs to offset fuel

Qantas shares rose more than 2 percent after the airline announced a string of measures aimed at cutting costs and boosting revenues, including the suspension of some services from Australia to Japan and New Zealand.

The airline estimated the impact of Japan's earthquake and tsunami, last month's earthquake in New Zealand and recent floods and cyclones in Australia's Queensland state on second-half underlying pretax profit would be A$140 million.

Qantas shares were trading 1.9 percent firmer at A$2.19 shortly after the market opened. The stock is still down more than 8 percent since the beginning of March after rising oil prices hurt airline stocks globally.

Australian rival Virgin Blue cut its earnings forecasts last week.

"The stock has been sold down quite a bit so this is probably a bit of a relief. If all those fuel surcharges stick it vindicates they are more diverse and probably have more pricing power than their competitors," said Brian Han, portfolio manager at Constellation Capital Management, which owns Qantas shares.

Chief executive Alan Joyce said he was reviewing the airline's manpower costs with the aim of cutting management headcount and annual and long-service leave balances.

"We want to limit redundancies wherever possible and will be using a range of initiatives to manage the reduction in capacity including annual and long service leave. At this stage only management positions will be made redundant," Joyce said in a statement.

Qantas' move to target management jobs comes after unions threatened strike action by some Qantas staff over outsourcing issues.

Qantas did not give full-year earnings guidance but said the potential impact on earnings in the second-half included A$45 million from the Japan earthquake and tsunami, A$60 million from flooding in Australia's Queensland state, A$20 million from cyclones in Queensland and A$15 million from last month's earthquake in New Zealand.

Qantas said it planned to cut domestic capacity growth in the second-half of the current financial year from 14 percent to 8 percent and international capacity growth from 10 percent to 7 percent.

The airline's low-cost subsidiary Jetstar would also suspend up to four return weekly services from Australia to Japan between April and August and suspend a Qantas service between Perth and Tokyo.

It would also reduce some services to New Zealand and retire two Boeing-767 aircraft early.

Qantas and Singapore Airlines said earlier this month they would raise fuel surcharges to offset higher oil prices, while Cathay pacific <0293.HK> warned that growing energy costs could hurt its profits. ($1 = 0.972 Australian Dollars)

(Reporting by Michael Smith; Editing by Ed Davies)