Qantas slashes flights as coronavirus costs top $100m
Qantas will make capacity cuts across its international and domestic network equivalent to grounding 18 aircraft until the end of May in response to the coronavirus outbreak, and says deeper cuts and job losses are on the cards if the health crisis is not contained.
The airline on Thursday said the coronavirus will deliver a blow of up to $150 million to its profit this year, which is three times more than the cost of the 2003 SARS outbreak.
The coronavirus outbreak has hit Qantas. Credit:AAP Image/Peter Rae
The carrier will cut flights into Asia by 15 per cent at least to the end of May, pulling back on flights to Hong Kong and Singapore and keeping flights to Shanghai suspended.
Jetstar flights to Japan and Thailand, and within Asia will be cut by 14 per cent.
With the loss of passengers feeding into the rest of its network, domestic flights will be cut by around 2 per cent, and flights to New Zealand will be cut by 6 per cent, the airline said.
“What’s important is that we have flexibility in how we respond to coronavirus and how we maintain our strategic position more broadly," Qantas chief executive Alan Joyce said in a statement to the ASX on Thursday.
“We know demand into Asia will rebound. And we’ll be ready to ramp back up when it does.”
The capacity cuts are the equivalent of grounding 18 aircraft across Qantas and Jetstar, leaving the equivalent of 700 full-time roles idle.
Mr Joyce said the airline would put staff on annual leave, using their existing leave balances, and freeze recruitment “to avoid job losses” and “help ride this out”.
Qantas chief financial officer Vanessa Hudson said the airline had plans to double the capacity cuts announced on Thursday if necessary, and extend them to the end of the year or beyond if the weakness continues.
Employee leave balances would tie the airline over for six months before redundancies would have to be considered, Ms Hudson said.
Qantas said the cost of the crisis would be between $100 million and $150 million even after attempts to mitigate the impact through capacity cuts and lower fuel costs.
In late January analysts were estimating the cost to be around $61 million.
Qantas announced its route cutbacks as it reported a statutory half-year profit of $445 million for the six months through December, down 4 per cent from the same period last year. Underlying profit before tax was at $771 million, down 0.5 per cent from the prior-year period.
Qantas declared a dividend of 13.5 cents a share, up from 12 cents a year ago, and announced a $150 million off-market share buyback.