Qantas, Jetstar downgrade flight levels amidst Omicron turbulence

Qantas, Jetstar downgrade flight levels amidst Omicron turbulence

Photo: Qantas, via Facebook.

Qantas Airways (ASX: QAN) has rescheduled flights for its namesake and budget airlines as the Omicron outbreak takes its toll on domestic demand and accessibility to certain destinations.

The group was previously planning for domestic capacity in the third quarter to be two per cent higher than pre-COVID levels, but expectations have now fallen to around 70 per cent of the pre-pandemic benchmark.

This will be achieved through a reduction in the frequency of services and the size of aircraft, although Qantas has emphasised it will "minimise inconvenience for passengers as much as possible".

The company was expecting total international capacity to be at 30 per cent of pre-COVID levels but expectations have now dropped to 20 per cent, mostly due to increased travel restrictions in countries like Japan, Thailand and Indonesia that are mostly impacting Jetstar’s leisure routes.

On a more positive note, Qantas notes other markets like London, Los Angeles, Vancouver, Johannesburg and India continue to perform well.

An assessment of the financial impact of these changes will be released with the group's half-year results in late February.

"The sudden uptick in COVID cases is having an obvious impact on consumer behaviour across various sectors, including travel, but we know it’s temporary," says Qantas Group CEO Alan Joyce.

"Thankfully, Australia has one of the world’s highest vaccination rates and the Omicron variant is milder than its predecessors. So, as challenging as this current phase is, we’re optimistic that it is likely to fast track a return to normal.

"People are already looking beyond what’s happening now with early bookings for the Easter holidays in April looking promising for both domestic and international."

Joyce says Qantas' focus on cash positive flying remains, notwithstanding some of the costs the group will have to absorb from this sudden drop in demand.

"We have the flexibility to add capacity back if demand improves earlier than expected, but 70 per cent still represents a lot of domestic flying and it’s a quantum improvement on the levels we faced only a few months ago," Joyce.

"Can I thank our people who have done an outstanding job of helping over a million Australians travel over the summer holidays, and to our customers for their ongoing understanding as we make our way through these latest challenges. This is a difficult time right across the community, but something we’ll get through."

QAN shares were down 1.8 per cent to $4.90 per share at 11:20am AEDT.

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