Qantas will slash 1500 jobs worldwide as Australia's largest airline seeks to combat rising oil prices and challenging market conditions, chief executive Geoff Dixon said on Friday.

The carrier also cancelled plans to hire 1200 new staff and increase its capacity by eight percent in 2008-2009, and announced it will retire up to 22 older aircraft from its fleet.

Dixon refused to guarantee there would be no more job losses, saying it hinged on the price of oil, which was set to push the airline's fuel bill up by more than $2-billion in 2008-2009.

"We hope there will not be any more job cuts, but we don't know where oil will be in 12 months," he told reporters.

Dixon said the aviation industry was facing a crisis worldwide due to the volatility in the price of oil, which last week soared to record highs above 147 dollars per barrel.

He said that by acting now, Qantas was protecting its competitive position and the majority of its 36 000 jobs, and was enabling the company to "grow profitably when conditions improve."

"It's as tough as I've seen it," Dixon said of conditions in the aviation industry. "It's not just aviation being hurt by oil prices, it's other things such as food."

Dixon said some operational jobs would be lost, although the bulk of positions being cut were in non-operational areas, with more than 20 percent of management and head office support jobs to go.

Most of the jobs losses will be in Australia but up to 200 based offshore have also been targeted in the cost-cutting drive, including 99 at call centres in Tucson, Arizona and London that will be shut, Dixon said.

In addition to the job cuts, which would come into effect by December, a recruitment and executive pay freeze would remain in place indefinitely, he said.

Commsec Equities economist Savanth Sebastian said the belt-tightening had been widely anticipated by the market.

"The cost of jet fuel has jumped 60 percent since the start of the year," he told ABC radio.

Cutting routes and capacity

"The airline sector is suffering, profits are dwindling. Cost-cutting has become a favourite at the moment, and wages make up a large amount of costs."

The latest round of cuts come after Qantas slashed flights to Asia and reduced its domestic capacity by five percent in recent months in response to the fuel crisis.

The airline has also hiked fares twice since May, and Dixon said more were on the cards if there was no relief on fuel costs.

"We are great believers in moving quickly," he said. "We will have to put up fares if oil continues to go up."

Dixon said that despite retiring the older aircraft from its fleet of 228, Qantas would press ahead with the introduction of new, more fuel-efficient aircraft such as the Airbus A380 and the Boeing B787.

He also said Qantas had reached agreement with the Australian Licenced Aircraft Engineers Association for a four-year deal on wages.

Qantas engineers represented by another union disrupted flights last month when they called a strike over wage demands.

The Australian Services Union said it was not expecting the Qantas announcement, saying the latest 1500 job cuts came on top of 1300 over the past three years.

AFP