Qantas is taking a major step to consolidate its engineering operation, ceasing heavy maintenance at one of its three main bases and signaling that a second base also could be wound down.

After a high-profile review of its engineering operation, the carrier has decided to shift Boeing 737 heavy maintenance from its Tullamarine base near Melbourne to its maintenance facility in Brisbane. Meanwhile, Boeing 747 heavy maintenance in Avalon, in the state of Victoria, will be scaled back as more of these aircraft are retired.

“Further changes” are expected at Avalon as fleet modernization continues, Qantas says. It predicts that there will be a further 60% reduction in heavy maintenance requirements over the next seven years, as older fleets like the 747s are replaced by new Airbus A380s and Boeing 787s.

This decision will mean the loss of 500 jobs, mostly at Tullamarine. Qantas CEO Alan Joyce says the consolidation will cost A$50 million ($49.2 million), including redundancy payouts. However, annual savings will be in the range of $A70-100 million.

The engineering review was widely expected to result in the closure of at least one of the three heavy maintenance bases. The Victoria state government was in talks with Qantas to avert the loss of jobs at Tullamarine, however, these efforts were not enough to prevent the work being shifted to Brisbane.

Qantas has been clear it needs major changes to reduce costs in its engineering operation. Joyce claims the carrier’s heavy maintenance costs are 30% higher than its competitors.

The Australian Workers Union says the latest consolidation moves are “the thin end of the wedge as fleets start to be retired.” The union has called for the government to hold a summit meeting to examine how Qantas’s plans will affect the viability of the aircraft maintenance industry in Australia.

The Tullamarine base will still perform line maintenance work after the restructuring. Brisbane will handle heavy maintenance for Boeing 737s, 767s and Airbus A330s. Some 737 and 767 work will also be conducted at Avalon, in addition to the 747 maintenance.