Staff and shareholders will not be impacted by the capacity cuts Qantas announced yesterday caused by the continuing COVID-19 crisis in China and other parts of Asia.
China’s coronavirus has seen Qantas deciding to cut capacity across its international and domestic network in response to the coronavirus crisis, which the airline now expects will deliver a blow of up to $150 million to its profit this year.
Investors loved the result and the action to cushion the company’s operations against the impact of the COVID-19 crisis and sent the shares up more than 5.7% to $6.68.
But it has also revealed that there will be no cuts to staff numbers with the cuts to capacity. The airline says around 700 or so full-time roles are affected by the reductions.
Qantas will use its paid leave provisions and freeze recruitment to absorb the impact of what is effectively taking 18 aircraft out of flight operations and will re-jig its maintenance schedules to use the opportunity provided by the grounded planes.
For shareholders, the airline also increased its interim dividend from 12 cents to 13.5 cents a share and announced a $150 million share buyback.
That’s a total of $351 million being distributed to shareholders at a time when other companies are trimming payouts or not maintaining buybacks.
Qantas announced its route cuts as it reported a statutory half-year profit of $445 million for the six months through December, down 4% from the December 2018 half. Underlying profit before tax was at $771 million, down 0.5%.
That solid performance was despite a $68 million impact on earnings from the civil unrest in Hong Kong since May 2019, the impact of the trade war between the US and China on its freight business, $51 million of higher foreign exchange costs, a $55 million increase in domestic costs as a result of the sales of its terminals and about $12 million of earnings lost through the impact of industrial action on Jetstar during the peak holiday season.
The airline on Thursday (when it announced its 2019-20 half-year profit) said it will cut flights into Asia by 16% at least to the end of May, pulling back on flights to Hong Kong and Singapore and keeping flights to Shanghai suspended.
With the loss of passengers feeding into the rest of its network, domestic flights will be cut by around 2%, and flights to New Zealand will be cut by 5%, the airline said.
“What’s important is that we have flexibility in how we respond to coronavirus and how we maintain our strategic position more broadly,” Qantas chief executive Alan Joyce said in a statement to the ASX on Thursday.
He said the cost of the crisis on the airline would be between $100 million and $150 million in the June half-year, with that somewhat offset by weaker fuel prices.
