Economic News and Issues

SYDNEY, Australia (AP) -- Qantas Airways, Australia's flagship carrier, announced Friday it was slashing its work force by 1,500 people worldwide and abandoning plans to hire 1,200 more as it tries to deal with skyrocketing fuel costs. Chief executive Geoff Dixon said the cuts would total 4 percent of its total work force and include closing call centers in Tucson, Arizona and London, causing the loss of 99 jobs there. About 1,300 jobs will be lost in Australia and the rest overseas.

Qantas is also abandoning plans to increase its capacity by 8 percent in the 12 months to mid-2009, with no growth whatsoever now expected in that period, Dixon said. Also, 22 older planes in Qantas' 228-strong fleet would be retired.

Qantas' budget subsidiary Jetstar would also be hit by the cuts, with its hiring program suspended, including pilots. A Jetstar cabin crew and pilot base in the southern city of Adelaide will be shut by September.

"The jobs to be cut will be principally concentrated in non-operational areas, although operational positions will also go," Dixon told reporters. "Over 20 percent of our management and head office support jobs will be cut."

Dixon said the cuts were necessary to ensure that Qantas survives what he described as a crisis in the aviation industry caused by big rises in the price of fuel. Fuel accounts for about 35 percent of Qantas' expenses, and rising fuel costs are expected to add more than A$2 billion ($1.95 billion) to the company's fuel bills to the year ending mid-2009.

The first step in the job shedding plan would be to ask for voluntary redundancies, Dixon said.

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By GENE MEYER
The Kansas City Star


A longtime McDonald’s Corp. executive with broad international and franchising experience on Tuesday was named president and chief executive officer of H&R Block Inc. effective Aug. 1.

Russ Smyth, 51, spent 21 years as a McDonald’s executive, including serving as president of the foodservice giant’s $6.7 billion European operations. He also was earlier in charge of a partnership unit, which included Chipotle Mexican Grill, Boston Market and other non-McDonald’s chains in which the company had stakes. Since leaving McDonald’s in 2005, Smyth has been a consultant for several private equity firms.

“Russ has excellent experience working with a powerful brand and delivering consistently high quality performance across a vast retail network,” Richard Breeden, Block chairman, said in a prepared statement released with the announcement.

The move caps a nine-month search that began following the resignation of Mark Ernst as Block’s chairman, chief executive and president. Ernst departed shortly after shareholders voted down a group of directors who had supported Block’s diversification into subprime mortgages, banking, investment advising and other nontax businesses.

After huge losses in subprime lending and years of disappointing returns from many nontax endeavors, dissenting shareholders led by Breeden, a former Securities and Exchange Commission chairman, began a proxy battle to return the Kansas City-based financial services giant to nearer its tax-preparing roots.

Block earlier this year sold what remained of Option One Mortgage Corp., its subprime lender, and said it might sell other nontax operations, including its two-year-old H&R Block Bank, if results did not improve sufficiently.

Breeden, who succeeded Ernst as chairman, and Alan Bennett, interim chief executive, whom Smyth will succeed, previously have suggested that the company might step up the sale of franchises to expand its worldwide chain of about 13,000 tax offices.

Co-founders Henry and Richard Bloch sold franchises more than four decades ago to expand the company. But since then, Block has been opening many company-owned offices, which provide higher profit margins.

Smyth could not be reached for comment Tuesday.

Smyth’s background and credentials appear to fit nicely into Block’s new back-to-basics business approach, said Alexander Paris Jr., a Barrington Research Associates Inc. analyst in Chicago and longtime Block watcher.

“If you strip away the mortgage business, the bank and the brokerage, what’s left is basically a retail store,” Paris said. “He knows the dynamics of retail stores.”

Smyth’s international background at McDonald’s will be helpful if Block wants to expand its Canadian and Australian operations, Paris said.

One of the biggest challenges in following a back-to-basics path to further growth remains the nature of the tax preparation itself, the analyst said. Tax work is an incremental business, driven by how many returns people file. If the Internal Revenue Service receives, say, 1 percent more returns than a year earlier and the number Block prepares goes up 2 percent, “that times fees per return become revenue,” Paris said.

Smyth also will become a Block director Aug. 1. Block also is asking shareholders at their September annual meeting to elect Bennett, a retired Aetna executive, to the board.

Block shares on Tuesday closed at $24.34, up 88 cents.

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