Qantas to Reduce International Flying by Nearly 25 Percent Over the Next Six Months
Qantas announced on Tuesday that they have reduced their international flight schedule by a quarter for the next six months due to the reduced-demand environment. The additional capacity reductions bring the Group’s cuts from 5 percent to 23 percent.
Today, Qantas announced that they will be further reducing their international schedule for Qantas and Jetstar from 5% to 23% year-over-year due to reduced demand related to COVID-19. The schedule reductions will also be extended until mid-September 2020. The largest year-over-year capacity reductions remain focused on Asia (31%), while service to the U.S. has been reduced 19%, the U.K (17%) and Trans-Tasman service has been reduced 10%. Qantas has taken the decision to deploy smaller aircraft and reduce frequencies rather than exit routes to maintain vital connectivity. The carrier has also grounded eight Airbus A380s until mid-September, leaving two in service. An additional two A380s are currently undergoing heavy maintenance and cabin upgrades.
Due to strong demand on the direct Perth-London route, Sydney-Singapore-London service (QF1 and QF2) will be temporarily redeployed on the Perth-London route from April 20, 2020. Additionally, Qantas’ new Brisbane-Chicago service has been delayed from April 15, 2020 until mid-September. Jetstar is suspending flights to Bangkok and reducing flights from Australia to Vietnam and Japan by nearly 50%. Domestic service by both Qantas and Jetstar will also be reduced between 3-5% through mid-September. The announced adjustments represent the equivalent of grounding 38 Qantas and Jetstar aircraft. The company plans on using the downtime to accelerate planned fleet maintenance where possible. In Tuesday’s announcement, Qantas Group’s CEO, Alan Joyce said,
“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. 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.”
Mr. Joyce continued,
“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 network. We’re in a good position to ride this out, but we need to take steps to maintain this strength. 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. We’re asking our people to use their paid leave off and, if they can, consider taking some unpaid leave given we’re flying a lot less. Annual management bonuses have been set to zero and the Group Executive team will take a significant pay cut for the rest of this financial year. It’s hard to predict how long this situation will last, which is why we are 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.”
In addition to the capacity reductions, Qantas is taking decisive action to limit the financial impact of the reduced-demand environment including the elimination of management bonuses for 2020, a freeze on all non-essential recruitment and consultancy work and paid/unpaid leave. Additionally, the Chairman will forgo fees, Board Members will reduce their fees by 30% and the Qantas Group CEO (Alan Joyce) won’t take a salary for 2020.