Alan Joyce has announced he’ll give up his salary for the remainder of the financial year after the Qantas Group announced capacity cuts equivalent to grounding 38 aircraft.
In a dramatic morning statement, the airline confirmed rumours that all but two Airbus A380s won’t fly, with eight taken out of service due to reduced demand and two undergoing maintenance.
Qantas also said the unprecedented nature of the coronavirus crisis means it is not possible to issue guidance on earnings for the remainder of FY20.
Chief executive Alan Joyce said, “We’re in a good position to ride this out, but we need to take steps to maintain this strength. We want to avoid job losses wherever possible. Annual management bonuses have been set to zero and the group executive team will take a significant pay cut.”
In total, Qantas will reduce capacity by almost a quarter for the next six months. Total international capacity cuts for Jetstar and Qantas will increase from 5 per cent to 23 per cent versus the same time last year.
The most significant reductions will be focused on Asia (down 31 per cent compared with the same period last year), the US (down 19 per cent), the UK (17 per cent), and trans-Tasman (down 10 per cent).
Qantas also pledged to swap in smaller aircraft to reduce the frequency of flights as opposed to scrapping routes altogether.
In detail, today’s announcements include:
- The existing Sydney-Singapore-London return service (QF1 and QF2) will be temporarily re-routed to become a Sydney-Perth-London service from 20 April.
- The start of Qantas’ new Brisbane-Chicago route will be delayed from 15 April to mid-September.
- Jetstar will make large cuts to its international network, including suspending flights to Bangkok and reducing flights from Australia to Vietnam and Japan by almost half.
- Jetstar’s daily Gold Coast to Seoul flight was suspended last week.
- Domestically, Qantas and Jetstar capacity reductions will be increased from 3 per cent to 5 per cent through to mid-September 2020, in line with broader economic conditions.
- The group’s total capacity reduction changes from 4 per cent (announced on 20 February) to 17 per cent for the last quarter of FY20.
- Given the reduced flying across the Qantas Group fleet, maintenance work will be brought forward where possible to make best use of this time.
- Qantas has cancelled the off-market buyback announced in February, which will preserve $150 million in cash. The interim dividend of 13.5 cents per share will still be paid on 9 April.
The Qantas board has also announced its members will take a significant drop in salary and bonuses. Joyce and chairman Richard Goyder will receive no salary; the board will take a 30 per cent reduction in fees; and the group executive management will take a 30 per cent pay cut.
All “non-essential” recruitment and consultancy work will be frozen.
Joyce said, “The Qantas Group is a strong business in a challenging environment. We have a robust balance sheet, low debt levels and most of our profit comes from the domestic market.
“When revenue falls, you need to cut costs, and reducing the amount of flying we do is the best way for us to do that.
“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.
“It’s hard to predict how long this situation will last, which is why we’re moving now to make sure we remain well-positioned. But we know it will pass, and we’ll be well-positioned to take advantage of opportunities when it does.”