The Qantas Group has just announced further cuts to its international flying, reducing capacity by almost a quarter for the next six months.
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 travel demand.
READ: CORONAVIRUS LATEST: Rolling Travel Industry News Updates
These additional changes will bring the total international capacity reduction for Qantas and Jetstar from 5 percent to 23 percent versus the same time last year and extend these cuts until mid-September 2020.
“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.”
Alan Joyce, Qantas Group CEO
Changes to services
Rather than exit routes altogether, Qantas will use smaller aircraft and reduce the frequency of flights to maintain overall connectivity.
The biggest reductions remain focussed on Asia (now down 31 percent compared with the same period last year). Capacity reductions to the United States (down 19 percent), the UK (down 17 percent) and Trans-Tasman (down 10 percent) will also be made in line with forward booking trends.
In response to strong customer demand for the direct Perth-London service, the existing Sydney-Singapore-London return service (QF1 and QF2) will be temporarily re-routed to become a Sydney-Perth-London service from 20 April.
Jetstar will make significant cuts to its international network, including suspending flights to Bangkok and reducing flights from Australia to Vietnam and Japan by almost half. Jetstar’s daily Gold Coast to Seoul flight was suspended last week.
The start of Qantas’ new Brisbane-Chicago route will be delayed from 15 April to mid-September.
Cost reduction
The Group is taking decisive action to mitigate the significant adverse impact of Coronavirus on demand, including longer-range capacity cuts that improve the business’s ability to reduce costs.
However, given the dynamic and uncertain nature of this situation, it is not possible to provide meaningful guidance at this time on the size of that impact on Group earnings for the remainder of FY20.
A number of cost reduction measures will be triggered across the Qantas Group for the remainder of FY20, including:
- The Qantas Chairman will take no fees.
- The Group CEO (Alan Joyce) will take no salary.
- Qantas Board will take a 30 percent reduction in fees.
- Group Executive Management will take a 30 percent pay cut.
- Freeze of all non-essential recruitment and consultancy work.
- Asking all Qantas and Jetstar employees to take paid or unpaid leave in light of reduced flying activity.
- A material drop in fuel price has provided a significant cost benefit in addition to the saving from lower consumption.
“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.”
Alan Joyce, Qantas Group CEO
Advice for customers
Qantas and Jetstar will contact customers affected by these changes in the coming week. Customers who booked via a travel agent will be contacted by their agent rather than the airline.
Typically, customers flying internationally will be offered an alternative flight via another capital city or a partner airline, or an alternative day. Disruption to domestic passengers is expected to be minimal given the continued high frequency on most routes.
To provide customers with greater flexibility and confidence when they book, Qantas and Jetstar will waive change fees for new international bookings made from today until the end of March if customers change their travel plans.
This applies to travel commencing up to 30 June 2020 and is limited to one free change per customer. Customers will need to pay any fare difference.
“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.”
Alan Joyce, Qantas Group CEO
The move follows Flight Centre Travel Groups global company-wide contingency changes last week.
Click here to read the full Qantas release.
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