Qantas chief executive Alan Joyce says the airline is axing 500 jobs and reviewing hundreds of maintenance positions after reporting a sharp fall in first-half profit.

The airline made $42 million in the six months to the end of December, down 83 per cent on the $241 million it made a year earlier.

Mr Joyce said the fall was due to industrial action, which led him to decide to ground the airline's entire fleet last year.

He announced a five-year plan involving changes in engineering, maintenance and ground handling services to make the airline more globally competitive.

He said the 500 jobs to go would be made "structurally redundant" because of aircraft retirement and operational changes.

And he flagged a wholesale rethink of the airline's Australian aircraft maintenance program.

"Our current heavy maintenance facilities are individually, and collectively, suboptimal in scale," he said.

"With aircraft retirements, there is simply not enough heavy maintenance work to justify the three facilities in Melbourne, Brisbane and Avalon [in Victoria]."

"Doing nothing is not an option. Preserving the status quo in the short term would only risk the business over the long term.

"We have no plan to move operations offshore but we need to consolidate our activities in Australia."

And he added: "We expect further jobs to be affected by those reviews."

Staff had earlier told the ABC they expected the airline's two heavy maintenance hangars at Melbourne's Tullamarine Airport and at Avalon to be consolidated into one operation.

Mr Joyce also announced a "consolidation" of the Qantas Airlines Aircraft Airworthiness Group, which employs engineers in Sydney, Brisbane and Melbourne.

He said maintenance would be consolidated in Sydney, "apart from roles specifically related to ports in Melbourne and Brisbane".

He also flagged a "total restructure" of the company's engineering supply chain.

And he said engineers would shift to work on a "maintenance on demand" basis.

"Last year I spoke about the need for our Qantas aircraft maintenance processes to accord with new technologies and new regulations.

"We don't maintain cars the way we used to; nor should we maintain aircraft like we did even 10 years ago.

"Maintenance on demand means that our well-qualified engineers will not be conducting aircraft checks that are not required.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 36 seconds 36 s Qantas staff talk about job cuts

"This will bring our practice into line with both the manufacturers’ guidelines and Civil Aviation Safety Authority regulations.

"Let me clarify that there will be no jobs going offshore - not one," he added.

Mr Joyce said Qantas would consult unions over the maintenance review.

Australian Manufacturing Workers Union national secretary Dave Oliver says it is unclear how many jobs will go in the airline's maintenance sector.

"We want to get the opportunity to sit down and get all the facts about the timing of the arrival of the new aircraft, the timing of the retirement of the old aircraft, and what impact that is going to have on the workforce," he said.

"Until we get an understanding on that, it's premature to be speculating about the number of jobs that may go."

The vice-president of the Australian and International Pilots Association, Richard Woodward, has told ABC Local Radio that his union has not ruled out another industrial confrontation with Qantas.

Mr Woodward believes any review by Qantas will focus on expanding its operations in Asia.

"Alan and his team have got this view that there's more money to be made in Asia than Australia, because we're a high-cost destination," he said.

Qantas says the impact of lost passenger revenues and forward bookings prior to the grounding cost the airline $95 million, while the direct impact of the grounding cost $70 million.

Shareholders again will not receive a dividend. The last dividend was paid in mid-2009.

Qantas shares rose more than 2 per cent after this morning's announcement.