Qantas (ASX:QAN) - CEO, Alan Joyce
CEO, Alan Joyce
Source: Herald Sun
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  • Qantas (QAN) has further slashed its international routes, reducing capacity by almost a quarter for the next six months
  • These cuts are a result of the spread of coronavirus Covid-19 into Europe and North America and the continuation throughout Asia
  • Subsidiary Jetstar is also reducing its international network, suspending and reducing flights, particularly in Asia
  • All in all, 38 Qantas and Jetstar aircraft across both the international and domestic sectors will be grounded
  • The company also announced that CEO Alan Joyce will take no salary for the remainder of the 2020 finical year
  • Group Executive Management will also take a 30 per cent pay cut
  • Qantas shares are up a slight 1.20 per cent and trading for $4.20 each

Qantas (QAN) has further slashed its international routes, reducing capacity by almost a quarter for the next six months.

These latest cuts follow are a result of the coronavirus Covid-19 spreading into Europe and North America over the past two weeks as well as the continued spread throughout Asia.

This has resulted in a sudden and significant drop in travel demand with, a 23 per cent slump in international seat sales compared to this time last year.

Rather than scrapping routes altogether, Australia’s largest airline has stated it will use smaller aircraft and reduce the frequency of flights.

As a result, Qantas has grounded eight of its largest aircraft, the Airbus A380, until mid-September.

A further two A380s are undergoing scheduled maintenance and cabin upgrades, therefore only two are flying.

In response to its strongly demanded Australia to Europe route, Qantas has temporarily re-routed the Sydney-Singapore-London service to Sydney-Perth-London. This will be effective from April 20.

The company has also delayed the start of its Brisbane-Chicago route from April 15 to mid-September.

Subsidiary Jetstar will also make significant cuts to its international schedule, including suspending flights to Bangkok and reducing flights from Australia to Vietnam and Japan by almost half.

Jetstar’s daily Gold Coast to Seoul, South Korea, flight was suspended last week.

All in all, 38 Qantas and Jetstar aircraft across both the international and domestic sectors will be grounded.

Given this outcome, Qantas stated that maintenance work will be brought forward where possible to make the best use of this time.

“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,” CEO Alan Joyce commented.

“This improves our ability to reduce costs as well as giving more certainty to the market, customers and our people,” he added.

In addition to cutting capacity and routes, Alan Joyce will take no salary for the remainder of the 2020 financial year and Group Executive Management will take a 30 per cent pay cut.

To avoid job losses and redundancies, all Qantas and Jetstar staff have been asked to take either paid or unpaid leave.

“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,” Alan said.

“Less flying means less work for our people, but we know coronavirus will pass and we want to avoid job losses wherever possible.”

“We’re asking our people to use their paid leave and, if they can, consider taking some unpaid leave given we’re flying a lot less,” he continued.

Given the size and uncertain nature of this situation, Qantas is unable to provide meaningful guidance at this time and the impact it will have on the remainder of the 2020 financial year.

Qantas shares are up a slight 1.20 per cent and trading for $4.20 each at 12:24 pm AEDT.

QAN by the numbers
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