Australia's Jetstar to cut capacity in January as pilots dispute drags on

SYDNEY (Reuters) – Budget airline Jetstar said on Monday it would cut domestic capacity by around 10% in January due to industrial action by pilots and was considering the sale of three Boeing Co (BA.N) 787-8 jets serving loss-making international routes.

The Qantas Airways Ltd (QAN.AX) subsidiary said the financial impact of disruptions by pilots and ground staff in December and January was estimated to be around A$20 million ($13.6 million) to A$25 million and had led it to do a broader review of its fleet and network, including its 787-8s.

“There’s no doubt that industrial action is expensive and frustrating, but we have to hold the line on costs or it threatens the long-term sustainability of our business,” Jetstar Group Chief Executive Gareth Evans said in a statement.

Jetstar said a business case had been developed to sell three of its 11 787-8s, with the capital to be reinvested in other parts of the Qantas Group or returned to shareholders, with a final decision expected in the first quarter of the 2020 calendar year.

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The airline said the proactive domestic capacity cuts in January would reduce disruption in the busiest month of the year, given the pilot’s union was required to give only three to five working days notice of industrial action over failure to reach a pay deal.

Qantas in October said Jetstar was performing weakly in the domestic market where airline margins have been squeezed by fuel costs and weakness in consumer spending.