Qantas to slash international capacity by nearly 25%, ground most A380s

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Qantas Airways Ltd said on Tuesday it would cut its international capacity by nearly 25% over the next six months, including grounding most of its Airbus SE A380s, as it grapples with a plunge in demand from the coronavirus.

It will now ground the equivalent of 38 planes, up from 18 announced last month, and its CEO will take no salary for the remainder of the financial year ending June 30 and management will receive no bonuses. All staff are being asked to take paid or unpaid leave. It is also cancelling plans for a A$150 million ($98.73 million) off-market share buyback to preserve cash.

Airlines around the world are experiencing a collapse in demand due to the coronavirus, which an industry body last week estimated could lower passenger revenue by as much as $113 billion this year.

“We expect lower demand to continue for the next several months so rather than taking a piecemeal approach we are cutting capacity out to mid-September,” Qantas Chief Executive Alan Joyce said in a statement. “We retain the flexibility to cut further or to put capacity back in as this situation develops.”

Qantas shares have fallen by 42% since the start of January.

The airline said it could no longer provide guidance on the financial impact of the coronavirus, which at the time of its half-year results on Feb. 20 it had estimated could result in a A$100 million to A$150 million hit to underlying earnings before interest and tax this financial year.

Its capacity reduction for the June quarter will rise to 17%, up from 4% at the time of its interim results.

That includes plans to ground eight of its 12 A380 superjumbos, with two remaining flying and the other two in maintenance.

The cuts are not limited to Asia, where the coronavirus outbreak began. Qantas will suspend its Brisbane-San Francisco and Melbourne-San Francisco routes and delay the launch of Brisbane-Chicago flights. Its Sydney-Singapore-London flight will be rerouted to become Sydney-Perth-London.

Rival Air New Zealand Ltd on Monday withdrew its full-year earnings guidance, froze hiring, offered unpaid leave to staff and said it would cut 10% of capacity across its network between February and June due to the virus.

German airline Lufthansa said last week it was considering temporarily grounding its entire fleet of 14 A380s in response to the fall in demand caused by the spread of the coronavirus.

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