Expect fewer flights to Asia as Qantas goes into damage control, dropping the number of international and domestic trips to the region as it manages the financial pain caused by the coronavirus outbreak.
About 700 jobs hang in the balance after Qantas said on Tuesday morning it would cut its capacity to transport passengers by 15 per cent until the end of May.
It will review the decision then.
It comes after Qantas posted an interim net profit slide to $445 million, blaming the 3.9 per cent drop on protests in Hong Kong, higher foreign exchange costs and slower global freight demand.
The airline has decided not to lift the suspension on Sydney-bound flights to one of China’s biggest cities, Shanghai.
It also intends to operate just seven flights a week to Hong Kong from Sydney, instead of 14.
Seats on Qantas international flights will be cut by 17 per cent. The airline’s budget arm Jetstar will follow Qantas’ lead and cut passenger capacity on Asia-bound flights by 14 per cent.
While travel to China has been suspended, Qantas chief executive Alan Joyce said the new restrictions were “secondary impacts” of the deadly coronavirus outbreak, which has brought “weaker demand [in] Hong Kong, Singapore and to a lesser extent Japan”.
Now was the right time for staff to consider taking annual leave, long service leave or using “their leave balances, which are quite considerable”, Mr Joyce said.
“What’s important is that we have flexibility in how we respond to coronavirus and how we maintain our strategic position more broadly,” he 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 is expected to lose $100 million-150 million off its annual profit and possibly more if the flight restrictions extend beyond May.
There is some good news, however, for frequent flyers.
In response to the drop in demand, Qantas frequent flyers will earn double credits for any flights booked between February 20-25.
Mr Joyce reassured travellers that the news wasn’t all bad for the airline.
He said Qantas fundamentals remained strong, with interim revenue up 2.8 per cent this financial year at $9.5 billion.
“In the domestic market, we dealt with some travel demand weakness and a structural change in our overheads from the sale of domestic terminals. Fundamentally, Qantas and Jetstar both did well,” Mr Joyce said.
“Internationally, the growth in passenger revenue outweighed the impact of disruption in Hong Kong and a freight market affected by trade wars.”
He said the ultra-long haul routes such as Perth-London continued to perform extremely well and the loyalty program had another record result.
The carrier announced an off-market share buyback of up to $150 million.
It will pay shareholders a fully franked interim dividend of 13.5 cents to the tune of $201 million.
-with agencies
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