Qantas axes flights in response to coronavirus
Flights cut by 23%; CEO to take no pay for rest of year
Qantas Airways
n/a
10:00 25/09/24
Australian airline Qantas said it was slashing international capacity by almost a quarter and grounding most of its A380 jets in response to plunging demand from the coronavirus outbreak .
Chief executive Alan Joyce said he would take no salary for the rest of the fiscal year, annual bonuses would be axed executive pay slashed as part swingeing cost cuts to protect the company's cash position. He also cancelled a AUD $150m offmarket share buyback announced in February.
The airline said the “dynamic and uncertain” nature of the epidemic meant was not possible to provide meaningful guidance of its impact on earnings.
It stressed the group was in a “strong position”, with low debt levels and a long debt maturity profile, AUD$1.9bn in cash plus a further AUD$1bn in undrawn facilities and AUD$4.9bn in unencumbered assets.
Rather than exit routes altogether, Qantas said it would use smaller aircraft and cut flight frequency to maintain overall connectivity. The cuts represent a 23% fall in internationals seats from a year earlier and are the equivalent of grounding 38 aircraft across its international and domestic network.
“The latest cuts follow the spread of the coronavirus into Europe and North America over the past fortnight, as well as its continued spread through Asia, which has resulted in a sudden and significant drop in forward travel demand,” the company said on Tuesday in a statement.
Flights to Asia were now down 31% year on year, the US 19%, the UK 17% and Trans-Tasman 10% reflecting the virus's global spread.
Eight of the airline’s Airbus A380 have been grounded for six months. Two are undergoing scheduled heavy maintenance and cabin upgrades, leaving two of the aircraft flying, Qantas said.
MAJOR CHANGES TO ROUTES
The existing Sydney-to-London return service via Singapore would now be re-routed through Perth from April 20 and the new Brisbane-Chicago route will be until mid-September.
The low-cost subsidiary Jetstar would also make significant cuts to its international network, including suspending flights to Bangkok and reducing flights from Australia to Vietnam and Japan by almost half, Qantas added.
Jetstar’s daily Gold Coast-to-Seoul flight was suspended last week. Domestically, Qantas and Jetstar capacity cuts would be increased to 5% from 3%.
Joyce said employees across the group were being asked to take annual or unpaid leave and the company would use the aircraft downtime to bring forward maintenance work.
“When revenue falls you need to cut costs, and reducing the amount of flying we do is the best way for us to do that. Less flying means less work for our people, but we know coronavirus will pass and we want to avoid job losses wherever possible," said Joyce.
He added that the plunging oil price had provided a "significant" fuel cost benefit in addition to savings from lower consumption. The group’s total fuel cost was now expected to be AUD$3.74bn with "limited participation to further falls in Brent crude prices".
“In the past fortnight we’ve seen a sharp drop in bookings on our international network as the global coronavirus spread continues. We expect lower demand to continue for the next several months, so rather than taking a piecemeal approach we’re cutting capacity out to mid-September," Joyce said.
“The Qantas group is a strong business in a challenging environment. We have a robust balance sheet, low debt levels and most of our profit comes from the domestic market. We’re in a good position to ride this out, but we need to take steps to maintain this strength."