UPDATE 1.20pm: Shares in Qantas have plunged after the national carrier warned of a big first-half loss and flagged 1000 job losses.
The airline said it would also cut spending and freeze salaries amid the "toughest market conditions it had ever faced".
Qantas said it expected to report an underlying loss of $250-$300 million for the six months to December 31.
Analysts suggested the airline could lose up to $500 million for the full financial year.
Shares in Qantas plunged to 99.5 cents on the news but recovered some lost ground to close down 13.5 cents, or 11.2 per cent, at $1.07.
Qantas chief executive Alan Joyce said trading conditions had deteriorated in November in particular, with both passenger loads and yields below the already negative trends for the year to date.
He said all spending cuts and assets sales were on the table including its frequent flyer program.
Mr Joyce said the circumstances demanded urgent action.
“We will do whatever we need to do to secure the Qantas Group’s future,” Mr Joyce said.
“The challenges we now face are immense – but we will overcome them and we will continue to build a stronger and better Qantas for Australia.
“Since the Global Financial Crisis, Qantas has confronted a fiercely difficult operating environment – including the strong Australian dollar and record jet fuel costs, which have exacerbated Qantas’ high cost base.
“The Australian international market is the toughest anywhere in the world.
“Our competitors in the international market, almost all owned or generously supported by their governments, have increased capacity to pursue Australian dollar profits, changing the shape of the market permanently.”
Mr Joyce repeated his warning that there had been an unprecedented distortion of the Australian domestic market, with Virgin Australia’s strategy to seek majority ownership and massive financial backing from foreign government-owned airlines.
“This foreign government capital has been used to finance dramatic increases in domestic capacity, with profound implications for the future of Australia’s aviation industry," he said.
“In November, Virgin signalled its intention to continue its strategy, which is designed to weaken Qantas in the domestic market, with a $300 million-plus injection from its foreign owners.
“The uneven playing field in Australian aviation is being tilted further and cannot and we will not stand still in these extraordinary circumstances.”
The Qantas Group will make accelerated cost reductions across all areas of the business, to achieve total cost savings of $2 billion over three years.
The existing Qantas Transformation program is to be accelerated, with an expanded mandate to achieve these targets, including the following steps: Staff reduction of at least 1000 positions within 12 months, with an ongoing review; CEO and Board pay cut; pay freeze and no bonus for executives; review of spending with top 100 suppliers; network optimisation and improved fleet utilisation and further overhead reductions.
Qantas will conduct a review of all planned capital expenditure to achieve further substantial reductions to ensure that the business generates positive net free cash flow from FY15.
The airline will launch an immediate review to identify structural changes that could potentially unlock sources of capital and value for shareholders.
Mr Joyce said the Group would take all steps necessary to respond to the toughest market conditions it had ever faced.
“We will focus relentlessly on cutting costs and improving productivity, while maintaining our competitive advantages as a business,” he said.