The Qantas Airways Limited (ASX: QAN) share price is down by 4% today, following an announcement of even further cuts to its domestic and international flight capacity.
The airline industry, both locally and globally, is under increasing pressure with air travel reduced as the impact of the global coronavirus pandemic escalates. Virgin Australia Holdings Ltd (ASX: VAH) is facing similar challenges.
International flight capacity cut by 90%, domestic by 60%
Due to the rapidly escalating coronavirus outbreak, Qantas has announced today further drastic measures with regards to its domestic and international flight capacity.
Qantas will cut total international capacity by around 90% until at least the end of May 2020, up sharply from the 23% reduction announced just last week.
Australia has recently imposed strict rules for any travellers entering Australia by plane. All passengers are required to self-isolate for 14 days, with Australia following New Zealand’s lead. Other countries throughout the world are also imposing tough new restrictions for any passengers entering their country. For example, Canada in the last 24 hours has made an announcement that its borders are now essentially closed for non-Canadian citizens, excluding Americans.
As per today’s release, total domestic capacity will also be cut savagely by Qantas, by around 60% until at least the end of May, up from the 5% reduction announced last week. This comes as demand for both leisure and corporate travel in Australia reduces dramatically.
Qantas noted that these further cuts mean that a total of 150 aircraft will now be grounded, including nearly the entire Qantas wide-body fleet. The company added that the cuts it had previously announced from May to September remain in place and are likely to be extended.
Strategies that Qantas will deploy to deal with the crisis include using some of its domestic passenger aircraft for freight-only flights to replace capacity that has been lost from the airline’s regular scheduled services.
Major impact on staff
Qantas acknowledges that these drastic measures will have a major impact on its 30,000 staff, resulting in a significant oversupply of staff resources until travel demand improves, which it admits will at least take weeks and possibly even months.
Qantas management will try to minimise the impact of the current situation on staff where possible, including the utilisation of paid and unpaid leave.
Customers can get a refund
Qantas noted that any customer with an existing domestic or international booking up until the end of May is able to cancel their flight and receive a travel credit voucher. This measure also applies to customers who make any new bookings up to the end of March and later change their minds for travel before the end of May 2020.
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