Qantas Culls Flights While European Carriers Quit Italy
Qantas Slashes International Capacity by 23% as Virus Bites
(Bloomberg) -- Airlines from Australia to Scandinavia stepped up capacity cuts as the coronavirus numbed demand and Italy locked down internal travel.
Qantas Airways Ltd. cut almost a quarter of international services for six months, grounded most of its giant A380 jets and slashed management pay. Air France-KLM said its main Paris-based arm will cancel 3,600 flights this month, while Finnair Oyj will eliminate 2,400 short-haul services in April.
Discount specialist Norwegian Air Shuttle ASA meanwhile said it will cut 3,000 flights through mid-June, including some trans-Atlantic trips, and temporarily lay off a “significant” proportion of employees, among them flying crew members, ground staff and office personnel.
Italy’s imposition of a ban on travel between provinces led Ryanair Holdings Plc to ground all services to, from and within the country starting later this week until April 8. IAG SA’s British Airways scrapped all flights to Italy on Tuesday and suspended operations to four airports in the north through April 4.
Qantas’s biggest reductions are in Asia, where the Australian airline’s capacity is now down 31% from a year earlier, it said Tuesday. The carrier also cut services to the U.S. and the U.K., or put smaller planes onto existing routes. Eight of Qantas’s 12 Airbus SE A380s will be grounded until mid-September.
The overhaul, one of the most dramatic responses to the outbreak by any airline, is accompanied by wide-ranging cost cuts. Qantas’s group executive managers and board members will take a 30% pay cut for the rest of the fiscal year through June. Chief Executive Officer Alan Joyce won’t be paid at all.
“In the past fortnight we’ve seen a sharp drop in bookings on our international network,” Joyce said in the statement. “We expect lower demand to continue for the next several months.”
Air France-KLM will cut long-haul capacity by about 13% this month out of both Paris and Amsterdam, while the French arm will slash capacity by a quarter in Europe and 17% on domestic routes.
The reductions at Finnair amount to 20% of its European traffic and follow the earlier cancellation of 1,400 flights. The virus has been especially disruptive for the carrier after it built Helsinki into a hub for travel to east Asia, utilizing the shortest flight times from anywhere in Europe.
At Norwegian, which has already been shrinking its network after struggling with a debt pile, the flight cuts amount to 15% of total capacity, according to a statement.
The discount operator and rivals including Wizz Air Holdings Plc were among airlines canceling flights to Italy amid the escalating crisis there. Budapest-based Wizz also said it will also suspend services from London Luton to Tel Aviv until March 23, citing Israel’s announcement of a 14-day quarantine period for all arrivals.
Qantas shares tumbled in early trading before rebounding as successive governments announced stimulus measures to cushion the economic impact of the virus, closing 7.2% higher. Air France-KLM was priced up 5.1% in Paris as of 12:26 p.m., and Finnair was up 5.3%.
The viral outbreak will cost global airlines as much as $113 billion in lost passenger revenue this year, the International Air Transport Association said last week. Only a couple of weeks earlier, IATA had expected a $30 billion hit.
Speaking to reporters on a call, Joyce said Qantas could make yet more cuts to services. “We can go a lot deeper,” he said.
He said Qantas has also asked Airbus for more time to confirm an order for as many as 12 A350-1000 jets for ultra-long-haul services from Sydney to London and New York.
The Sydney-based company is asking all employees to take paid or unpaid leave as fewer planes take to the air. Qantas also scrapped a stock buyback to save A$150 million in cash. Analysts at Jefferies International described the measures as “significant but appropriate.”
“We know we can ride this out,” Joyce said on the call. “Not all airlines in the world will.”
--With assistance from Phil Serafino, Andrew Noël and Charlotte Ryan.
To contact the reporters on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net;Christopher Jasper in London at cjasper@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, ;Anthony Palazzo at apalazzo@bloomberg.net, Edward Johnson
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