Qantas cuts back
Qantas will cut back flying on the Tasman as the impact of coronavirus will hit the airline’s profit by as much as $156 million.
The airline has also announced temporary reductions to flights across Asia, imposed a hiring freeze and asked staff to take leave in response to a drop in demand due to the epidemic.
The actions were announced as part of the Qantas group’s half-year results, where the net profit impact of coronavirus was estimated at between A$100m ($104.5m) and A$150m for the full year.
Lower fuel prices — triggered by a virus-related global economic slowdown — will soften the blow.
Temporary reductions of around 5 per cent will be made to Qantas and Jetstar’s flying between Australia and New Zealand.
Qantas will cut flights across the Tasman by 6 per cent with cancellations on Sydney-Auckland,
Melbourne-Auckland and BrisbaneChristchurch.
Jetstar will reduce its Tasman flying by 5 per cent. The announcement is bad news for not only those travellers booked on the now cancelled flights but those looking for cheap fares to Australia. Any reduction in capacity almost inevitably means fares on the most popular route out of New Zealand will climb.
Last year Jetstar quit its lossmaking New Zealand regional routes.
There is no change to other key parts of the Qantas International network, such as the US and UK.
Qantas Group chief executive Alan Joyce said the airlines were taking action now to limit exposure to softening markets.
“Coronavirus resulted in the suspension of our flights to mainland China and we’re now seeing some secondary impacts with weaker demand on Hong Kong, Singapore and to a lesser extent Japan,” he said.
“We’ve also seen some domestic demand weakness emerging, so we’re adjusting Qantas and Jetstar’s capacity in the second half.”
Reductions of around 2 per cent of total group domestic Australian flying are slated for the second half.
The capacity taken out is the equivalent of grounding 18 aircraft across Qantas and Jetstar until the end of May, which in turn impacts about 700 fulltime roles.
“To avoid job losses we’ll be using leave balances across our workforce of 30,000 and freezing recruitment to help ride this out. We’ll also take advantage of having some aircraft on the ground by bringing forward planned maintenance,” said Joyce.
The airline reported an underlying profit before tax for the half-year was A$771m (down 0.5 per cent) and statutory profit before tax was A$648m (down 6.2 per cent).
Joyce said there were obviously some challenges facing the airline in the second half.
”But we’re confident that we can manage that impact, as we have in the past.”
Coronavirus has meant suspending its Sydney-Shanghai service until the end of May — possibly longer.
“It’s important to keep in mind that mainland China represents about 2 per cent of our total international network. But we’re seeing flow-on demand weakness on some other Asian routes — Hong Kong in particular, but also Singapore. And to a lesser extent, Japan.”
Total capacity to Asia would be cut by 15 per cent, at least until the end of May.
“We have a lot of flexibility in how we respond. We can extend these cuts, cut deeper if we need to, or add capacity back in.”
He said demand into Asia — particularly, China — would rebound, and the airline would be able to ramp up capacity when it did.
Air New Zealand has also suspended its mainland Chinese flight between Auckland and Shanghai until the end of next month and will restore more limited services when travel restrictions lift. It will also cut back flights to Hong Kong in response to falling demand.
The airline will report its half-year result next Thursday and is expected to update the market on the impact of the coronavirus.
Yesterday Auckland Airport said coronavirus could hit its full-year profit by as much as $10m.