Chief executive of coronavirus-hit Qantas Alan Joyce is giving up his salary for the rest of the financial year.
Joyce's total remuneration last year was A$23.8m ($24.8m) although his base salary was A$2.17m. His salary sacrifice is one of a range of sweeping measures including pay being slashed for other executives and 23 per cent capacity cuts across Qantas and Jetstar for the next six months.
Air New Zealand boss Greg Foran yesterday said he would cut his $1.65m salary by 15 per cent this year as his airline also cut capacity to a total of 10 per cent across its network.
Qantas Group CEO was paid a total of $24m last year. Photo / Dean Purcell
The latest cuts follow the spread of the coronavirus into Europe and North America over the past fortnight, as well as its continued spread through Asia, which has resulted in a sudden and significant drop in forward travel demand.
Qantas said in addition to cutting capacity, a number of cost reduction measures will be triggered including:
• Annual management bonuses set to zero for this financial year which ends on June 30. • Qantas Chairman will take no fees. • Group CEO (Joyce) will take no salary. • Qantas Board will take a 30 per cent reduction in fees. • Group executive management will take a 30 per cent pay cut. • Freeze of all non-essential recruitment and consultancy work. • Asking all Qantas and Jetstar employees to take paid or unpaid leave in light of reduced flying activity.
Joyce was the highest paid executive in Australia last year.
The biggest capacity reductions remain focused on Asia (now down 31 per cent compared with the same period last year). Capacity reductions to the United States (down 19 per cent), the UK (down 17 per cent) and transtasman (down 10 per cent) will also be made in line with forward booking trends.
Rather than exit routes altogether, Qantas says it will use smaller aircraft and reduce the frequency of flights to maintain overall connectivity.
This approach results in eight of the airline's largest aircraft, the Airbus A380, grounded until mid-September. A further two A380s are undergoing scheduled heavy maintenance and cabin upgrades, leaving two of its A380s flying.
In response to strong customer demand for the direct Perth-London service, the existing Sydney-Singapore-London return service (QF1 and QF2) will be temporarily re-routed to become a Sydney-Perth-London service from April 20.
The start of Qantas' new Brisbane-Chicago route will be delayed from April 15 to mid-September.
Eight Qantas A380 passenger jets will be grounded until mid-September. Photo / Supplied
Jetstar will make significant 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 [1] through to mid-September 2020, in line with broader economic conditions.
In total, this is the equivalent of grounding 38 Qantas and Jetstar aircraft[2] across the international and domestic network. The group's total capacity reduction changes from 4 per cent (announced on February 20) 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.
The group is taking decisive action to mitigate the significant adverse impact of coronavirus on demand, including longer range capacity cuts that improve the business' ability to reduce costs.
However, given the dynamic and uncertain nature of this situation, it is not possible to provide meaningful guidance at this time on the size of that impact on group earnings for the remainder of the financial year.
In line with its financial framework the group says it is in a strong position, with low debt levels and a long debt maturity profile, A$1.9 billion in cash plus a further $1 billion in undrawn facilities and $4.9 billion in unencumbered assets.
To help maintain this position in the face of current uncertainty, the board has decided to cancel the off-market buyback announced in February, which will preserve A$150 million in cash. The interim dividend of 13.5 cents per share will still be paid on April 9.
A material drop in fuel price has provided a significant cost benefit in addition to the saving from lower consumption. The group's total fuel cost is now expected to be $3.74b (excluding the benefit of capacity reductions compared with the same time last year) with limited participation to further falls in Brent crude prices.
Joyce said that in the past fortnight the airline had seen a sharp drop in bookings on its international network as the global coronavirus spread continues.
"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," he said.
"We retain the flexibility to cut further or to put capacity back in as this situation develops. We're in a good position to ride this out, but we need to take steps to maintain this strength."
Joyce said that with revenue falls airlines 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."
