Qantas Airways Limited (ASX: QAN) told 2,000 employees on Monday morning that their jobs would be terminated.
Staff were informed their ground crew roles across 10 airports would be outsourced.
The decision came after the airline started an evaluation of outsourcing options back in August.
The move would save Qantas about $100 million a year, it estimated.
Qantas has now sacked 8,500 of what used to be a 29,000-strong workforce before the COVID-19 pandemic.
"This is another tough day for Qantas, particularly for our ground handling teams and their families," Qantas domestic and international chief Andrew David said.
"Unfortunately, COVID has turned aviation upside down. Airlines around the world are having to make dramatic decisions in order to survive and the damage will take years to repair."
The Qantas share price was flat at the time of writing, trading at $5.52.
Union bid 'falls well short'
The evaluation process saw external service providers bid for the ground handling work to see how cheap they could perform the currently in-house functions.
The Transport Workers' Union (TWU) also had a right to put in a bid of its own, but the airline ultimately rejected that proposal.
"The TWU's in-house bid claimed that significant savings could be made but it failed to outline sufficient practical detail on how this might be achieved, despite us requesting this information multiple times throughout the process," said David.
"Even with the involvement of a large accounting firm, the bid falls well short of what the specialist external providers were able to come up with."
TWU labelled Monday "a shocking blow" for the 2,000 workers. The union's national secretary Michael Kaine said after investing millions in training the in-house employees, they're replaced with "less trained workers on lower conditions".
"This is a dark day as Qantas management rejects a thorough and competitive bid by its highly skilled and dedicated workers to keep their own jobs," he said. "To reject its own workers like this is spiteful and will hurt the airline deeply.".
Qantas revealed that a number of other third parties submitted bids that met all the requested objectives. Some of the bids saved as much as $103 million annually.
The winning bidders will be notified on Monday, with the transition to outsourcing to take place in the first quarter of next year.
"We have used these specialist ground handlers at many Australian airports for decades and they've proven they can deliver a safe and reliable service more efficiently than it's currently done in-house," David said.
"This isn't a reflection on our people but it is a reflection of economies of scale and the urgent need we have because of COVID to unlock these efficiencies."
Qantas will have its domestic operations return to 60% of pre-COVID levels by Christmas. International flights are a long way off, although the airline's chief executive Alan Joyce indicated last week mandatory passenger vaccinations might provide a shortcut.
"International travel isn't expected to return to pre-COVID levels until at least 2024," David said.
"We have a massive job ahead of us to repay debt and we know our competitors are aggressively cutting costs to emerge leaner."
