Qantas slashes flights to Asia, warns of $150m earnings risk

Qantas will slash flights across Asia as the coronavirus crisis continues to damage airlines around the world.

Feb 20, 2020, updated Feb 20, 2020
Qantas expects its full-year earnings to take a $100-150 million hit from the coronavirus outbreak. (Photo: ABC News: Margaret Paul)

Qantas expects its full-year earnings to take a $100-150 million hit from the coronavirus outbreak. (Photo: ABC News: Margaret Paul)

The airline said reduced travel due to the coronavirus outbreak was expected to carve between $100 million and $150 million out of its earnings this year, although Qantas added that the impact will be softened by lower fuel prices, which are also being caused by the economic disruption from the virus.

The airline will reduce its overall group capacity to Asia by 15 per cent until at least the end of May, with Qantas International capacity to be cut by 16 per cent, and Jetstar seats to the region to be reduced by 14 per cent.

Flights between Sydney and Shanghai will remain suspended and the lucrative route to Hong Kong from Sydney will be halved from 14 flights a week to seven.

“Cononavirus resulted in the suspension of flights to mainland China and we’re now seeing some secondary impacts and weaker demand on Hong Kong, Singapore and to a lesser extent Japan,” Qantas chief executive Alan Joyce said.

Qantas flights from Melbourne and Brisbane will also be reduced, as will Jetstar flights to Japan and Thailand, and intra-Asia flights

Qantas and Jetstar flights between Australian and New Zealand will be reduced by around 5 per cent, while the group’s domestic capacity will be reduced by 2.3 per cent in the second half of the year “to better match demand”.

Staff asked to take leave amid flight cuts

The cuts will leave the Qantas group with a surplus of about 700 full-time staff.

“We have 30,000 employees across the group,” Qantas chief executive Alan Joyce told reporters.

“The way we’ll manage it is to ask across the 30,000 people, for people to take annual leave, long-service leave and use their leave balances, which are quite considerable.”

Joyce said asking employees to take paid leave would allow the airline to manage the staffing situation for at least six months.

“What’s important is that we have flexibility in how we respond to coronavirus and how we maintain our strategic position more broadly,” Joyce said.

“We can extend how long the cuts are in place, we can deepen them or we can add seats back in if the demand is there.”

Qantas shares rise on dividends, even as profits slip

The announcement of the capacity reductions came as Qantas unveiled a 3.9 per cent drop in profit to $445 million in the first half of the financial year.

Shareholders will receive a dividend of 13.5c per share and the company will launch an off-market share buy-back of up to $150 million.

By 10:25am (AEDT) Qantas shares had climbed 7 per cent to $6.74.


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