Qantas will axe 1,500 jobs, scrap its hiring plans and cut capacity growth to zero, in response to high oil prices.

The job cuts represent about four per cent of Qantas' 36,000 strong workforce and include the closure of call centres in Tucson, Arizona and London, with the loss of 99 jobs. It will also close the cabin crew and pilot base for its Jetstar offshoot in Adelaide.

In total, around 1,300 jobs will be lost in Australia and between 150 to 200 overseas. There will be some forced redundancies with most of the pain expected to be over by December.

The carrier has also cancelled plans to hire 1,200 additional workers.

Qantas chief executive Geoff Dixon said the airline needs move quickly to ensure its future in an industry facing "a major crisis throughout the world".

"Acting now, on top of the measures already taken, will protect our competitive position, protect the great majority of over 36,000 jobs and enable us to grow profitably when conditions improve," Mr Dixon said.

In addition to the job cuts, the airline will also slash planned capacity growth in the 2008/09 financial year from eight per cent to zero.

It will retire up to 22 older aircraft from its fleet of 228 but confirmed it would proceed with a major upgrade to the new fuel efficient A380 and B787 aircraft.

Mr Dixon said the airline would be reviewing its network on a route-by-route basis and was not planning to cut any actual routes.

"We are trying not to cut out routes," he said.

"But if necessary we will lessen our presence in some markets."

Mr Dixon said despite the difficulties associated with high oil prices, Qantas would be able to withstand the challenge and ensure its shareholders continued to benefit from ongoing profits.

"The company is quite profitable and obviously we will have a very strong profit return for last year [2007/08]," he said.

Qantas, which will release its annual results in August, has forecast its 2007/08 pre-tax profit to be 40 per cent higher than the previous year's $1.03 billion.

Mr Dixon said Qantas needed to make the changes to ensure the future sustainability of the company.

"We have a very big order book - $35 billion worth of aircraft - and if we are not profitable we won't have those aircraft and we won't have growth," he said.

If fuel costs continued to rise Qantas would have to put fares up and further reduce capacity, but Mr Dixon hoped there would be no more job cuts.

"We hope there will not be anymore job cuts, but we don't know where oil will be 12 months," he said.

Mr Dixon reiterated the company's fuel bill would increase by more than $2 billion in 2008/09, representing about 35 per cent of the company's costs.

In some relief to airlines on Thursday, oil prices on the New York Mercantile Exchange fell $US5.31 to $US129.29 a barrel. It recently hit highs above $US145.

Centre for Asia Pacific Aviation executive chairman Peter Harbison said Qantas' cutbacks were sensible.

"It is taking the prophylactic approach as it were - rather than waiting to have surgery if it were to get seriously wounded in what is likely to become a dangerous marketplace."

Shaw Stockbroking analyst Brent Mitchell said the changes were no surprise, given higher fuel prices and the troubled state of the global aviation market.

"It's not going to be easy for them going forward," he said.

"They've done all the things: they've reduced the cost base, they've put up ticket prices, they've reduced capacity.

"I think more and more, you'll see services move from Qantas to Jetstar."

Meanwhile, Virgin Blue announced a second round of cutbacks on Friday to deal with rising oil prices.

Virgin Blue will withdraw two aircraft from its domestic routes, introduce new baggage fees and lift some fares.

Qantas shares closed steady at $3.30 while Virgin Blue gained one cent to 68 cents.