Qantas will abandon all Qantas brand services to Townsville from Sydney and replace them with Jetstar, the latest in a long line of substitutions in which Qantas has dropped out of several holiday destinations in Queensland and elsewhere in favour of its discount subsidiary.

The economics are simple in Qantas' view: Jetstar saves it about 40 per cent in costs. So the more routes it can take over without jeopardising the lucrative Qantas inter-capital business-class traffic, the better.

But Jetstar has achieved the easy savings in the domestic market and Qantas is still faced with pruning $1 billion from expenses this year, only $750 million of which it claims to have identified.

So now it is focusing on a tougher nut - pilot salaries. Pilots are the traditional kings of the transport industry, with pay and conditions the envy of many. But in the light of such events as the collapse of much of the US airline sector, and the rise of discount flyers, pilots have come down to earth somewhat.

Australia was affected with the demise of Ansett and the appearance of Virgin Blue and Jetstar. But now Qantas is turning its guns on its own: the pilots who fly its Qantas-brand domestic and international services.

Already the company and the union, the Australian and International Pilots Association, are testing each other out with initial enterprise bargaining agreement jousting. Even the pilot salary figures the two put out reflect their positions, with the union quoting base rates and Qantas adding in up to $85,000 in overtime, allowances and superannuation.

Qantas is taking a hard line. When the domestic EBA opened earlier this year it offered pilots a one-off 3 per cent cash bonus that would not feed through to superannuation and allowances.

Qantas human resources chief Kevin Brown said Virgin Blue had pilot rates 28 per cent below Qantas domestically (a figure disputed by the AIPA) and he is focusing on that difference. "We're seeking some convergence between Qantas and Virgin," he said. "We offered a cash payment rather than a pay rise but the pilots rejected that. We remain with the door open."

AIPA spokesman Peter Somerville said the union had offered a comprehensive package that would apply to domestic and international pilots. It consisted of 10 per cent pay rises over three years, career flexibility for pilots to move between Jetstar and Qantas, a 15 per cent cut in pilot numbers and flexible rosters that would have saved Qantas 6 per cent a year.

Mr Brown admits that Qantas' domestic operation is a tight ship. "We've got some of the most efficient pilots in the world on short haul." Nonetheless, competition from Virgin and the fact that Jetstar pays pilots about 32 per cent less than Qantas mean the pressure is on.

International operations are hard to compare. Qantas pays its pilots more than British Airways but uses lower-paid second officers, which BA does does not have, in its crew mix. Emirates and Singapore have pay scales 20 to 25 per cent below Qantas international.

Mr Brown said he would like to see average flying hours per week rise from 16 to 18.

"Currently, they (international pilots) fly a few less hours than the average carrier and are paid more than the average carrier, and we need to compete with the average carrier," Mr Brown said. (Australian dollar is the currency used in this artcle)