Cutting costs as airlines face collapse
STRUGGLING airlines have been granted some but not all of their wishes in a $715 million bailout that temporarily wipes security charges and aviation fuel taxes.
The move by Transport Minister Michael McCormack (pictured), which also waives navigation and firefighting costs, came after he was warned by one carrier that it and others could collapse within six months.
“These measures are in response to an unprecedented and likely sustained period of falling international and domestic aviation demand related to the impact of COVID-19,” Mr McCormack said. Qantas is cutting international capacity by 90 per cent and domestic by 60 per cent, while the situation is grimmer for rival Virgin Australia.
Credit-rating agency S&P this week cut Virgin’s debt to CCC+, saying operating conditions “may be deteriorating at a faster pace” than the airline “can implement changes to protect cash generation and balance sheet health”.
That sent Virgin into a 9 per cent tailspin yesterday against the backdrop of the biggest market rise since the 1990s.
Mr McCormack said there was an “upfront benefit” of $159 million to carriers through refunds for fees paid since February 1. But they didn’t get everything. It’s understood there was a request for wage subsidies to stop sidelined staff leaving the industry before demand returns.
Regional Express chief operating officer Neville Howell warned the airline “cannot survive the next six months of this global emergency if the forecast of worldwide health experts materialises”.
AUSTRALIA’S flagship carrier Qantas will axe 90 per cent of its international flights by the end of the month as the coronavirus stops people from jetting overseas.
Qantas and Jetstar domestic flights will also be cut by 60 per cent – a huge jump from the 5 per cent reduction in flights the airline had earlier predicted.
The move prompted union chiefs to call on Prime Minister Scott Morrison for a cash injection to protect aviation jobs that will be needed once the crisis has passed.
The international cuts “largely reflect the demand impact of severe quarantine requirements on people’s ability to travel overseas”, Qantas said in a statement.
It means 150 jets will be grounded, including almost all of the airline’s wide-bodied longhaul fleet of A380 superjumbos.
One of the few long-haul flights expected to remain in the air will be Sydney to London via Perth.
The airline said the cuts “reflect a rapid decline in forward travel demand due to government containment measures, corporate travel bans and a general pullback from everyday activities across the community”.
The aircraft will be parked until “at least the end of May 2020”, with other previously announced cuts remaining in place until September. Some of the unused passenger aircraft will be repurposed to boost the Qantas fleet of freight aircraft that will keep flying through the crisis.
The airline has 30,000 staff and will look to manage the cost impact by asking staff to use paid and unpaid leave.
Chief executive Alan Joyce has already announced he will not be paid for three months, as well as cutting executive pay and axing bonuses.
Transport Workers Union secretary Michael Kaine said: “The government must act urgently to protect jobs and working families. It is vital that workers and their representatives are included in plans for assisting the aviation industry.
“This is not the long-term decline of an industry but a potentially short, sharp hit that will require workers to be ready to go back to their jobs.”