Qantas slashes flights as coronavirus hits passenger numbers

Qantas has reduced its international flying capacity by a quarter, grounding eight Airbus A380s and leaving just two of the largest planes in its fleet flying.

The cuts to international routes will last for six months after a “sudden and significant drop in forward travel demand”, the airline says. Smaller planes will now service a number of key international routes.

Globally, the airline industry could lose more than US$100bn (A$150bn) this year because of plunging passenger numbers.

Qantas’s signature Sydney-Singapore-London return service (QF1 and QF2) will be temporarily rerouted to become a Sydney-Perth-London service.

To help cut costs, Qantas’s chief executive, Alan Joyce – Australia’s highest paid executive, who took home nearly $24m in 2018 – will take no salary this financial year.

Qantas suspends worker for allegedly spreading coronavirus misinformation

Annual management bonuses have also been scrapped this year, and the chairman and board will take no fees – or a significant reduction in fees. Non-essential recruitment and consultancy work has been frozen and staff will be asked to take paid or unpaid leave in light of reduced flying activity.

Joyce said the past fortnight had seen a sharp drop in bookings on the airline’s 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,” he said. “This improves our ability to reduce costs as well as giving more certainty to the market, customers and our people.

“We retain the flexibility to cut further or to put capacity back in as this situation develops.”

Joyce said reducing flying was the most effective way for Qantas to cut costs and preserve its workforce.

“Less flying means less work for our people, but we know coronavirus will pass and we want to avoid job losses wherever possible. We’re asking our people to use their paid leave and, if they can, consider taking some unpaid leave given we’re flying a lot less.

“It’s hard to predict how long this situation will last, which is why we’re moving now to make sure we remain well-positioned. But we know it will pass, and we’ll be well-positioned to take advantage of opportunities when it does.”

Globally, airlines around the world are being forced into similar cost-cutting measures. Carriers have cancelled flights into airports within lockdown regions. United Airlines, JetBlue and Lufthansa have closed routes. British Airways and Air France-KLM are allowing passengers who book flights to change their travel plans without a fee for the next year.

The International Air Transport Association has estimated that global revenue losses for passenger airlines in 2020 will be between US$63bn and US$113bn.

Moody’s Investors Service has revised its outlook for the global passenger airlines industry to negative from stable.

“The negative outlook reflects the increasing risk to demand for passenger air travel as the coronavirus expands globally,” said Jonathan Root, Moody’s senior vice-president.

“The uncertainty and the speed of the outbreak will pressure airlines’ operating profits and cash generation for at least the first half of 2020. We expect further capacity reductions as the number of infected people and affected countries grow.”

Moody’s now estimates an operating margin of less than 5% for 2020 for the aggregate of the airlines it rates, down from its pre-coronavirus expectation of about 9%.

Significant unknowns — uncertainty about the virus’s active period, its eventual geographic spread and the scale of infections in a given country or region — complicate efforts to project the operational and financial impact.

Qantas and Jetstar will contact customers affected by changed flight schedules in the next week. Typically, customers flying internationally will be offered an alternative flight via another capital city or a partner airline, or travel on an alternative day.

Disruption to domestic passengers is expected to be minimal given the continued high frequency on most routes. The latest information will be published on Qantas and Jetstar websites.

Source: Read Full Article