Domestic capacity running at only 30% of normal Could reach 50%...

• Domestic capacity running at only 30% of normal
• Could reach 50% by Christmas if Queensland opens to NSW
• Will unlock A$600 mln of annual cost savings in FY21

(Adds CEO comments, details of cost saving plans)

SYDNEY, Oct 23 (Reuters) - Qantas Airways Ltd (QAN) said on Friday that Australian state border closures due to the coronavirus pandemic had cost it A$100 million ($71 million) in earnings in the first quarter and would have a negative impact in the second quarter as well.

The airline is running less than 30% of its normal domestic capacity due to border closures, having earlier expected to be operating around 60% at this time, Qantas Chief Executive Alan Joyce said in a speech at the airline's annual meeting of shareholders.

"Essentially, this is a timing issue," he said. "We know the upswing will materialise – just later than planned."

Joyce said if Queensland opened its borders to the country's most populous state, New South Wales, domestic capacity could reach up to 50% by Christmas.

In New Zealand, where there are no such domestic border restrictions, Air New Zealand Ltd (AIR) is operating nearly 85% of its pre-pandemic capacity.

Qantas has grounded almost all of its international flights and said on Friday around 18,000 employees remain stood down receiving government benefits rather than their usual pay.

The airline is on track to meet its target of A$1 billion a year of ongoing annual cost savings from the 2023 financial year, Joyce said, with A$600 million of that to be unlocked this financial year, ending June 30, 2021.

"Progress has been strong, with the FY21 programme about halfway through, and expected to be 90% complete by the end of December 2020," he said.

($1 = 1.4033 Australian dollars)