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MARCH 2020

Week 12


Qantas and Virgin Australia to suspend international flights

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March 20th 2020

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Australia's two major airline groups, Qantas and Virgin Australia, plan to suspend all international flights and significantly reduce domestic flying from the end of March in response to the coronavirus pandemic. Read More »

The decisions, announced this week, followed the introduction of tough self-isolation rules for incoming passengers or the closing of borders by Australia, New Zealand and other governments in an effort to slow the rate of coronavirus infections in the community.

Qantas and its low-cost carrier (LCC), Jetstar, will cease international flights into and out of Australia from the end of March until "at least the end of May", the airline group said on March 19.

It also intended to reduce domestic capacity by about 60% by slashing frequencies on existing routes. The airline group said it planned to maintain essential domestic, regional and freight connections as much as possible.

Qantas Group CEO, Alan Joyce, said the efforts to contain the spread of COVID-19 had led to a huge drop in travel demand "the likes of which we have never seen before".

"This is having a devastating impact on all airlines," Joyce said in a statement. “No airline in the world is immune to this, with the world’s leading carriers making deep cuts to flying schedules and jobs.

"Our strong balance sheet means we’ve entered this crisis in better shape than most and we’re taking action to make sure we can ride this out."

The network changes represented the temporary grounding of about 150 aircraft, including all of Qantas's 12 A380s, five 747-400s and 11 787-9s, as well as Jetstar Australia and New Zealand's 11 787-8s.

The Qantas fleet of 18 A330-200s and 10 A330-300s were expected to continue flying. In particular, the cargo carrying capability of the A330 meant the type was likely to operate freight-only services to replace lost capacity from the reduced passenger schedule.

The airline group has stood down about 20,000 employees until the end of May, with affected staff to take any accrued leave or unpaid leave.

"With the huge drop in revenue we’re facing, we have to make difficult decisions to guarantee the future of the national carrier," Joyce said.

"The reality is we’ll have 150 aircraft on the ground and sadly there’s no work for most of our people.

“Rather than lose these highly skilled employees who we will need when this crisis passes, we are standing down two-thirds of our 30,000 employees until at least the end of May.”

Virgin Australia said this week it would suspend all international flights from March 30 until June 14.

The decision meant the airline's inaugural Brisbane-Tokyo Haneda nonstop service, due to begin on March 29, and the resumption of Melbourne-Denpasar nonstop services on the same day, have been postponed.

Virgin Australia also planned to halve its domestic capacity until June 14 and ground of 53 aircraft, including its entire wide-body fleet of five 777-300ERs and six A330-200s.

Virgin Australia Group CEO, Paul Scurrah, said the airline group was having "constructive discussions with team members and relevant unions" about the impact on staff.

"Wherever possible, we will aim to avoid redundancies by fast-tracking measures such as the use of accrued leave, leave without pay and redeployment," Scurrah said in a statement on March 18.

"The Virgin Australia Group is focused on ensuring we manage the business through this difficult period and maintain a strong and competitive aviation industry in Australia for years to come."

Qantas and Virgin Australia said they would continue to operate international flights until March 30 as part of efforts to repatriate Australians currently overseas and return visitors back to their country of origin.

Also this week, the Australian government announced an A$715 million (US$416 million) support package for aviation, by waiving items such as the aviation fuel excise, air traffic management charges and security charges.

Scurrah told The Australian Financial Review newspaper the government may need to do more to help airlines survive the slump in demand for air travel, arguing it was prudent for the industry to discuss the need for additional assistance sooner rather than later.

"So that if those circumstances do eventuate ... we're not turning up in a desperate circumstance asking to work on something that should have been worked on months back," Scurrah told the newspaper.

Qantas's Jetstar affiliates in Asia were also scaling back their operations. Singapore-based Jetstar Asia was grounding its entire fleet between March 23 and April 15, while Vietnam-headquartered Jetstar Pacific and Jetstar Japan have already stopped all international flights and were operating a significantly reduced domestic schedule.

Across the Tasman, Air New Zealand said this week it would cut long-haul capacity by 85% in coming months by suspending scores of routes across Asia and the Americas. Capacity on trans-Tasman services would be down 80%, while domestic capacity would decline by about 30% and the airline's London cabin crew base would be closed.

"We are now accepting that for the coming months at least Air New Zealand will be a smaller airline requiring fewer resources, including people," Air New Zealand CEO, Greg Foran, said in statement.

Air New Zealand said it was working with unions on a range of measures to reduce its staff costs by 30%.

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