Airline IT victim of cost cuts

Qantas has shelved a project to replace a 26-year-old IT system that supports almost 10 million members of its frequent-flyer program because it would cost another $40 million to complete.

The decision highlights the pressure on Qantas to slash costs to retain a cash buffer and keep up the fight in the domestic market against a rejuvenated Virgin Australia.

Qantas has already forked out $20 million on the NewGen program begun in early 2010 to replace the existing frequent-flyer IT platform called Profile.

The new system was originally due to be rolled out within 18 months.

Insiders have questioned the benefits of the work on the new program so far but Qantas said the old system had been enhanced by incorporating elements from NewGen. Contractors were kept on until October to ensure part of the new project was bolted onto the old Profile system.

Those full-time Qantas employees working on the new system have since been sent to other projects within the frequent-flyer business such as the Qantas Cash and Acquire programs.

Qantas insists that, despite its age, the "existing system is running well with the enhancements we've made", although it concedes that a "new system is something we'll need to consider in the future".

Staring at a first-half loss of up to $300 million, Qantas has outlined a plan to axe at least 1000 jobs within the next 12 months and strip out an extra $2 billion in costs over the next three years.

It also has a team of internal strategists working on a wide-ranging structural review, which will canvass the possibility of partial sales of assets such as the frequent flyer division and Jetstar. The airline has yet to decide whether it will bring in external advisers to work on the review.

On Thursday it called for expressions of interest for voluntary redundancies among its engineering workforce but did not outline how many jobs were involved.

Qantas chief executive Alan Joyce and his senior managers on Wednesday will meet heavyweights from unions representing the bulk of the airline's 30,000-strong workforce.

The ACTU is heading the talks, which will be the first time unions get an opportunity to hear about the business units likely to be hit hardest by the job cuts.

But, in a sign of divisions within the union movement, the Australian Licensed Aircraft Engineers Association has decided to boycott the meeting.

ALAEA president Paul Cousins said it had told the ACTU that it did not want it to bargain on its behalf.

"The ACTU has said that Qantas needs help. The truth of the matter is Qantas management needs removal," he said.

Analysts say large institutional investors recognise the challenges facing Qantas management but some are questioning its costly strategy of maintaining a 65 per cent share of the domestic market.

The strategy has forced Qantas into a fare war with Virgin, severely denting earnings of both.

■ Regional NSW carrier Brindabella Airlines is in the hands of receivers KordaMentha after it failed to recover from the grounding of eight of its 10 aircraft over overdue maintenance checks.