iscover
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.”
Craigy
says:Grounding 10 of the 12 A380s’ makes sense in these circumstances and replacing them with smaller aircraft makes a lot of sense. Although, will it be QF11/12 or QF93/94 that will continue the A380 services? Also the rerouting of QF1/2 via Perth using a B789 and avoiding Singapore is an interesting move as Singapore from what I have read are managing the virus very well. With the reduced flying, it is a good opportunity to accelerate the repainting of the fleet before the 100 birthday celebrations later this year. I also wonder if the retirement of the B744 will be accelerated. Three more B789 will join the fleet over the next few months.
Virgin on the other hand have very limited options with the B77W and A332 aircraft with their route structure. It will be interesting to see what Scurrah and his team come up with.
Richard
says:Strong leadership.
Good move by the chairman and CEO to take a pay cut. Sets the right example.
Tough times ahead, but fortunately QF is very strong and can ride this out. Can’t say the same for Virgin, my tip they won’t see Xmas.
George
says:A pay cut for the rest of the financial year. So 3 months, how generous for someone that earns millions a year ! Disgusting
Brad
says:Just curious how much you’ve given up to help the business you work for?
Zeljko
says:So they cut their income by 30% , but the business is only running at what 20% or less, they should only be taking 1 million ,full stop till the business gets into profit, why is he being paid at all his directorship ,is non performing ,he’s not meeting his KPI, so why are the board and directors being paid, performance based salary’s and bonuses ? Over paid for underperformance , I feel sorry for the share holders,
Dan
says:Will the A380’s be stored at Alice springs ?
Peter Ritty
says:Glad what their policy is, so guess my trip to FNQ and Japan will be hit. Prob is seperate booking and QF will prob not refund if my JQ flts are hit.
Red Cee
says:QF1 and 2 are being re routed via Perth. Will QF9 and 10 still be operating?
Rocket
says:Yes, because one starts at Sydney and the other at Melbourne
Damian
says:This has given me a lot more respect for Alan Joyce .
George
says:Damien, why. Because he is taking a pay cut for just three months, or because he will only earn 7 million for the 9 months of the financial year?
PB
says:Understand that when Joyce and the Chairman wrote off the fleet value, creating the largest one time loss of any Australian company, that Qantas could not help but to make money since that eliminated depreciation. It hurt the shareholders at the time, but by ruining the company in one year it was able to report profits after that, ensuring that the Chairman and Joyce would profit from their share option and incentive package. This was a totally corrupt move, and I am revulsed by these two men who really run Qantas by themselves. Qantas is a regional airline in truth, and to pay what they pay to Joyce is unjustifiable. Their fare structure is protected by lack of competition. It will be interesting to see how Qantas emerges from this period.
john
says:is that the remainder of is base $2.17m for the year or the remainder of his total remuneration that pushes $24m?
Alan
says:I feel sorry for Alan, how will he survive on a mere 18 mil? Of course if you consider his salary has risen astronomically in the last 11 years, (2.3 to 23M?) why shouldn’t it fall astronomically? Especially as Qantas is in process of denying customers full flight refunds (transfer of clients’ money to shareholders who then pay Alan and his execs)