Qantas will axe at least 1000 jobs over the next year and warned that it will slump to a loss of up to A$300 million ($330 million) in the first half, blaming a market deterioration in trading conditions and weaker return on fares.

Qantas shares slumped 16 per cent to A$1.02 - just shy of an all-time low of 96 cents reached last year - following the earnings warning. It will be the first time the airline has recorded a loss in the first half since it was privatised in the 1990s.

In a dramatic response to its rapidly deteriorating financial position, the airline will consider the possibility of partial sales of businesses including Jetstar Australia and its frequent flyer loyalty programme.

It said "all options are on the table" as part of a wide-ranging structural review.

The airline would not name the most likely options but possible courses of action include sell-downs of its investments in Asia. They include Jetstar Asia in Singapore and Jetstar Japan.

Air New Zealand competes with both Qantas and Jetstar on the Tasman, while it also competes with Jetstar on the main New Zealand trunk routes.

After pleading over the last two weeks for financial assistance from the federal government, Qantas said in a profit warning on Thursday that the ''challenges we now face are immense''.

The airline will step up cost savings over the next three years, stripping out A$2 billion.

It has also signalled that it will consider selling parts of its business after saying that "all options are on the table" as part of a wide-ranging structural review. It has not named potential units which could be sold but there has been speculation that it could consider a part sale of its frequent flyer business.

The cutting of at least 1000 jobs over the next year will include 300 roles that Qantas announced last month would be axed following the closure of its heavy maintenance base at Avalon, near Geelong. 

Qantas said it now expects to report an underlying loss before tax of between A$250m and A$300m for the six months to December 31. The first half is typically the airline's strongest.

Australia's largest airline said it expected yields - or return on fares - across the group to be 3.5 per cent lower in the first half compared with the same period last year.

Qantas chief executive Alan Joyce said the circumstances demanded urgent action.

''The challenges we now face are immense - but we will overcome them and we will continue to build a stronger and better Qantas for Australia,'' he said in a statement.

Joyce also said there had been ''unprecedented distortion of the Australian domestic market with Virgin Australia's strategy to seek major ownership and massive financial backing from government-owned airlines''.

''We cannot and we will not stand still in these extraordinary circumstances.''

Qantas has been lobbying the government to provide financial assistance which could include a debt guarantee or the purchase of a small stake.

Joyce says the airline will continue to "work through our cost reductions, capital expenditure and structural review".

He also defended his own position when asked about the significant fall in Qantas's share price since he began as chief executive five years ago.

"The board have been very supportive on this. The board understands the dynamics in the marketplace," Joyce said.

"Qantas has an amazing management team."

- Sydney Morning Herald