CANBERRA, AUSTRALIA - Australia's Qantas Airways Ltd cancelled 35 flights yesterday and was moving critical maintenance tasks overseas as a campaign of strikes by engineers widened to the country's west.

Members of the Australian Licensed Aircraft Engineers Association (ALAEA) walked off the job in four of the country's biggest cities, disrupting flights in Sydney, Melbourne, Brisbane and Perth, over Qantas's refusal to grant a 5 per cent wage rise.

The airline is offering 3 per cent for around 1,500 engineers.

"If you are able to make A$1.4 billion (S$1.8 billion) in such a tough climate, and you've made it off the back of your employees working very, very hard, I think that it is appropriate that you give something back to them," said ALAEA federal president Paul Cousins, apologising to passengers for disruptions.

"Qantas is one of the most profitable, if not the most profitable airline in the world. But like all airlines, they're flying planes that are a bit old and a bit thirsty," ABN Amro Morgans private client adviser Bill Bishop said.

Qantas, Australia's biggest airline, reported net profit of A$617.6 million for six months ended December, doubling its first-half earnings on strong demand for air travel and trimmed fuel costs.

The carrier, the world's 10th-largest by market value, said last month it still expected to achieve its target of 40 per cent profit growth for the current year, which ends on June 30.

But in the same month, ratings agency Standard and Poor's revised its outlook for Qantas to negative from stable, reflecting pressure on the carrier's cash flow from a fuel bill expected to rise by US$1.9 billion in 2008/09.

The airline, like many other Australian firms, is facing a conundrum with inflation running at just over 4 per cent, while workers are demanding bigger pay rises inline with a booming resource economy in its 16th year of expansion.

At the same time, consumer demand is cooling, fuel prices are on the rise and employers are looking to cut costs. A Qantas spokeswoman told Reuters the carrier would reveal how much the strike was costing each day. But ABN Amro Morgans' Mr Bishop said the cost was likely to be considerable.

"Suffice to say it put the share price under A$3," he said.

In an effort to adjust, Qantas is looking to permanently move many critical maintenance jobs offshore by employing engineers in London and the United States, possibly antagonising union members at home, an Australian newspaper reported.

Qantas chief executive Geoff Dixon said American engineers in Los Angeles completed two full aircraft maintenance inspections, known as A-checks, in the past 10 days, while other inspections were outsourced to Avalon airport in Melbourne.

"I will confirm that we are now doing A-checks in Avalon and Los Angeles, and we are looking at other options," Mr Dixon told the paper.

In a letter to staff, Mr Dixon said the Qantas board met in New York last week and told executives to hold out against "untimely" engineer pay demands, meaning the campaign of rolling strikes will likely drag on beyond the current two-day stoppage.

"We have what I regard as a very sophisticated and fair wages policy. We are not going to change it now," Mr Dixon said.

Mr Cousins said up to 15 Qantas managers from around Australia, all former engineers, had also worked on Melbourne aircraft as local staff joined 500 workers striking nationally.

The stop-work also disrupted up to eight international flights. --Reuters