Qantas Group has 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.
The spread has resulted in a sudden and significant drop in forward travel demand.
These additional changes will bring the total international capacity reduction for Qantas and Jetstar from five per cent to 23 per cent versus the same time last year and extend these cuts until mid-September 2020.
The biggest reductions remain focussed on Asia – now down 31 per cent compared with the same period last year.
Capacity reductions to the United States (down 19 per cent), the UK (down 17 per cent) and Trans-Tasman (down ten per cent) will also be made in line with forward booking trends.
Announcing the changes, Qantas Group chief executive, 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.”
Rather than exit routes altogether, Qantas will use smaller aircraft and reduce the frequency of flights to maintain overall connectivity.
This approach results in eight of the airline’s largest aircraft, the Airbus A380, grounded until mid-September.
A further two A380s are undergoing scheduled heavy maintenance and cabin upgrades, leaving two of its A380s flying.
In response to strong customer demand for the direct Perth-London service, the existing Sydney-Singapore-London return service will be temporarily re-routed to become a Sydney-Perth-London service from April 20th.
The start of Qantas’ new Brisbane-Chicago route will be delayed from April 15th to mid-September.
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.
Domestically, Qantas and Jetstar capacity reductions will be increased from three per cent to five per cent through to mid-September 2020, in line with broader economic conditions.
In total, this is the equivalent of grounding 38 Qantas and Jetstar aircraft across the international and domestic network.
Given the reduced flying across the Qantas Group fleet, maintenance work will be brought forward where possible to make best use of this time.
Qantas said it was taking decisive action to mitigate the significant adverse impact of coronavirus on demand, including longer range capacity cuts that improve the business’ 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 financial 2020.
In line with its financial framework the group is in a strong position, with low debt levels and a long debt maturity profile, $1.9 billion in cash plus a further $1 billion in undrawn facilities and $4.9 billion in unencumbered assets.
To help maintain this position in the face of current uncertainty, the board has decided to cancel the off-market buyback announced in February, which will preserve $150 million in cash.
The interim dividend of 13.5 cents per share will still be paid on April 9th.
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