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Weak demand sparked by Covid-19 has led Qantas (ASX: QAN) to slash international routes for six months, driving down international capacity by up to 23 per cent with eight of its largest Airbus A380 aircraft grounded.
Group CEO Alan Joyce will also take no salary for the remainder of the financial year, and chairman Richard Goyder will take no fees.
Following the recent suspension of subsidiary Jetstar's flights to Seoul, Qantas will also suspend flights to Bangkok and reduce flights from Australia to Vietnam and Japan by almost half.
Capacity has been cut 31 per cent in Asia, 19 per cent to the United States, 17 per cent to the UK and 10 per cent to New Zealand.
With the Airbus A380 aircraft selling at around US$446 million each, that's around AUD$5.4 billion worth of planes that won't be flying until at least September.
Elsewhere the new Brisbane-Chicago route will be delayed from 15 April to mid-September, while strong demand has meant Sydney will be connected to the Perth-London route instead of a connection through Singapore.
Domestically, Qantas and Jetstar capacity reductions will be increased from three per cent to five per cent in line with broader economic conditions. This means that overall the group's total capacity is only down 4 per cent.
After previously announcing profits would take a $100-150 million hit in the half, Qantas now says it is not possible to provide meaningful guidance at this time on the size of that impact on Group earnings for the remainder of FY20.
"In the past fortnight we've seen a sharp drop in bookings on our international network as the global coronavirus spread continues," says Joyce.
"We expect lower demand to continue for the next several months, so rather than taking a piecemeal approach we're cutting capacity out to mid-September.
"This improves our ability to reduce costs as well as giving more certainty to the market, customers and our people."
Joyce says Qantas also retains its flexibility to cut further or to put capacity back in as this situation develops.
"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," he says.
"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.
"Annual management bonuses have been set to zero and the Group Executive team will take a significant pay cut for the rest of this financial year.
The group also highlights low debt levels, with $1.9 billion in cash plus a further $1 billion in undrawn facilities and $4.9 billion in unencumbered assets.
"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," says Joyce.
"We're in a good position to ride this out, but we need to take steps to maintain this strength.
"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."
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