Qantas is set to slash up to a third of its 1000 IT staff as part of plans to slice $1 billion off its operating costs over the next two years.

IT staff could be the hardest hit by the airline's cost-cutting drive with full details likely to be revealed in early 2004 following an outsourcing review of its Sydney data centre which employs 230 staff.

Announcing the review earlier this year, Qantas CIO Fiona Balfour said existing infrastructure and equipment was not meeting the company's continually growing needs.

The review is in addition to ongoing job cuts in recent months through a rationalisation of one in 10 IT jobs as part of efforts to keep labour costs down, according to Australian Services Union (ASU) organiser Raph Kennedy.

She said Qantas revealed there could be further possible job cuts during talks in the past few weeks and is betting the data centre which supports the airline's voice and data network will be outsourced early next year to Telstra and IBM GSA. Kennedy said up to 50 staff at the airline's IT operations in Melbourne are also under threat as Qantas considers closing the site in March 2004.

"The remaining 80 or so IT staff were recently redistributed to Sydney in the same or similar jobs," she said.

But it is not just IT that faces the knife, the company plans to increasingly switch its workforce to a casual basis.

Currently 15 per cent of its workforce are casual workers and this will be increased to 25 per cent over the next two years as part of the cost-cutting drive.

ASU's Kennedy said morale among IT staff is at an all-time low with employees extremely frustrated.

"They feel their work is not valued and they have real concerns around job security. They're also genuinely concerned that the level of service at Qantas will suffer if jobs are outsourced," she said.

Kennedy said IT staff have also complained to the ASU about the company's existing outsourced desktop arrangement with Telstra claiming it is a "shamozzle" with accountability on both sides invisible.

She said the term "review" is an interesting way of labelling a predetermined plan to downsize IT.

Balfour, she said, has made "no bones to staff" about how she pictured the ideal IT organisation at the airline.

"That is [a model] with five experts at the top and all IT operations completely outsourced; Qantas is also considering India as an outsourcing centre for IT, engineering and maintenance staff; it's nothing to do with the references management have made to competitive advantage, it is about getting IT off the books," Kennedy said.

A Qantas spokeswoman said the airline currently has around 1000 IT staff, 180 of which are contractors.

When announcing the outsourcing review, Qantas said it was committed to retaining the 230 affected employees and no jobs are under threat as those who are not offered employment with the outsourcing provider will be redeployed.

The airline's profits have dropped 20 per cent in the past 12 months and radical restructure includes reorganising into three stand-alone business units - flying businesses, flying services (including engineering and maintenance and airports) and affiliated businesses such as catering, freight, Qantas Holidays and Qantas Defence Services.

All the businesses will be supported by a corporate centre, including a shared services group providing IT, human resources and financial services to each business unit.