Jetstar Asia will also be returning five aircraft, reducing fleet size to 13 aircraft.
Qantas announced today its post-Covid-19 plans, which include a reduction in workforce as well as issuance of new shares to raise more cash for the airline. The airline is also targeting to reduce its cost by A$15 billion over the next three years.
Key to this announcement was a 20% reduction in the Qantas workforce, translating to 6,000 jobs, and continuing to place another 15,000 employees on no-pay leave. Qantas will also be raising up to A$1.9 billion in equity through issuance of new shares.
Qantas Group announced a three-year plan to accelerate its recovery from the havoc that Covid-19 wrecked upon global travel. The plan is aimed towards future profitability, long-term shareholder value and to preserve as many jobs as possible.
Qantas’ three-pronged approach can be outlined as follow:
- Rightsize the Group’s workforce, fleet and other costs according to demand projections, with the ability to scale up as flying returns.
- Restructure to deliver ongoing cost savings and efficiencies across the Group’s operations in a changed market.
- Recapitalise through an equity raising to strengthen the Group’s financial resilience for recovery and the opportunities it presents.
Given that Covid-19 has presented a challenge never seen before to most businesses, so Qantas has said that its plan is “designed to account for the uncertainty associated with the crisis, preserving as many key assets and skills as the Group can reasonably carry to support the eventual recovery“.
Qantas sees that flying will be very much reduced over the next few years, so costs will have to correspondingly go down before flying recovers to pre-Covid-19 levels. Qantas is targeting to save A$15 billion over three years, achieved through the following:
- Reducing workforce by at least 6,000 roles across all parts of the business
- Continuing the stand down for 15,000 employees, particularly those associated with international operations, until flying returns
- Retiring Qantas’ six remaining 747s immediately, six months ahead of schedule
- Grounding up to 100 aircraft for up to 12 months (some for longer), including most of the international fleet
- Deferment of A321neo and 787-9 fleet deliveries
Qantas will suspend international services until at least mid-2021; A380s to be in storage until at least 2023
According to Executive Traveller, Qantas will most likely suspend international operations until the middle of next year when a vaccine for Covid-19 is most likely available, except for a handful of countries where ‘green lane’ arrangements are in place.
Qantas is also projecting that its international network will only reach 50% of what it used to be in the 2021-2022 financial year, and therefore there isn’t much use for the A380s as the traffic slowly recovers. As such, Qantas will be parking all of its 12 A380s in the Mojave Desert for at least three years, and a decision will be taken later as to whether all twelve will return to the skies.
In the meantime, Qantas will be using its Dreamliners as the flagship workhorse as well as the A330s for its international services until the volumes are back, Qantas Group chief executive Alan Joyce reportedly said.
Qantas is also bringing forward the retirement of all its Boeing 747s immediately, six months ahead of schedule. This also means that some services previously served by the jumbos will have to be replaced by smaller aircraft in due time, when these routes reinstate.
Jetstar Asia to lose five aircraft and 180 staff
Jetstar Asia will be reducing its 700-odd staff strength by more than a quarter, with the 180 jobs cut from across the business. It’s likely that the bulk of the cuts will come from crew, as Jetstar Asia will also be reducing its fleet size from 18 to 13.
The smaller fleet will mean less flying in the foreseeable future, which will also mean that crew numbers can be reduced in tandem.
With the reduction in flying, it’s likely that Jetstar will look to axe some routes. Jetstar was to launch Singapore-Colombo services on 1 July, which has now been postponed to mid-October. It remains to be seen if this route will still continue to start come October.
Qantas international and Jetstar Asia flights grounded since March
Both Qantas international and Jetstar Asia services were suspended since late March, after Covid-19 flared up in many countries resulting in border closures.
Qantas was targeting to resume at least some international flights between Australia and New Zealand by July, but this was ruled out by New Zealand’s Prime Minister Jacinda Ardern who suggested that September was a more realistic timeframe.
Australia’s Trade Minister Simon Birmingham has already earlier said that international visitors will unlikely to be admitted into Australia until 2021, thereby dashing hopes of a resumption of Qantas international services anytime soon.
This is definitely not a good look, but certainly not unexpected as many major carriers – including Singapore Airlines and Cathay Pacific – have looked to reduce costs and raise fresh funds earlier this year.
Credit to them for choosing to furlough staff when the crisis first hit, but as this proves to be a long-lasting shockwave for aviation, it seems like there’s not many options left apart from letting employees go, while trying to conserve and raise cash for the coming years.
Closer to home, the reduction in Jetstar Asia’s operations will inevitably mean that customers will be looking at a reduced offering from low-cost carriers in the next few years, and likely, higher fares as travelling resumes in a post-Covid-19 world.