Qantas cuts international 25% through September facing coronavirus-induced demand drop

Qantas is the latest major carrier to announce significant changes to its schedule in the wake of the coronavirus demand drop. Not only with the company make significant reductions in its international operations, but it plans for those changes to last until mid-September 2020, the furthest out any airline has made changes yet. The carrier will swap types, reduce frequencies and suspend or delay some routes completely.

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.

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.

– CEO Alan Joyce

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The Qantas schedule cuts

Qantas is not taking the cuts lightly. Facing a significant drop in forecasted revenue the carrier will ground all but two of its A380s, generally swapping the planes for smaller 787s where routes remain in service. This includes the flagship Sydney-Singapore-London QF1/2 trip. As of 20 April 2020 that route will swap to a 787 operating via Perth. This makes the Perth-London service double daily, albeit on a plane with 250 fewer seats than the A380. With the A380 removed from Singapore service the Qantas First Class Lounge will also close at Singapore until an aircraft with first class seats returns to the market.

Read More: Massive cuts, uncertain recovery timelines for aviation in the face of COVID-19

The carrier will also postpone the launch of its Brisbane-Chicago route, planned for 15 April, until later this year. The Brisbane-San Francisco and Melbourne-San Francisco routes will also be suspended as of 18 April. Sydney to Dallas and Melbourne to Los Angeles both swap from an A380 to the much smaller 787.

Flights to China also remain affected, with Shanghai now halted through at least mid-July. Hong Kong will see half the regularly scheduled service, with a daily flight from Sydney and the other frequency split between Brisbane and Melbourne.

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Jetstar Airways also trims schedule

The route cuts for JetStar Airways are currently only planned through June, with Melbourne-Bangkok completely gone, Ho Chi Minh City reduced by more than 50%, Japan by almost 40% and Bali taking more modest cuts. JetStar Asia (Singapore-based) will cut capacity by almost 40%, including suspension of the Taipei and Osaka routes. JetStar Japan suspended Hong Kong, Taipei and Shanghai through May and will further reduce Manila flights and its domestic service. Vietnamese arm JetStar Pacific suspended all international routes and is further trimming domestic services.

Cash on hand, but cutting costs

Qantas is keen to point out its A$1.9 billion in cash and another A$1 billion in undrawn credit facilities. But it is also taking significant measures to conserve cash. CEO Alan Joyce notes, “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.”

Beyond the reduced flying schedule the carrier will also halt its share buyback efforts and undertake a number of other efforts:

• Annual management bonuses set to zero for FY20.
• For the remainder of FY20:
  • Qantas Chairman will take no fees.
  • Group CEO will take no salary.
  • Qantas Board will take a 30 per cent reduction in fees.
  • Group Executive Management will take a 30 per cent 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.

Not mentioned in the release is any discussion of longer term route expansion efforts, including Project Sunrise. Just a few weeks ago Joyce was still keen on that plan, despite challenges with securing pilot union cooperation for the efforts. Discussing it now, as the carrier slashes capacity and asks crew to take unpaid leave, would be rather inappropriate.