The reasons behind salary sacrifices are bad news in the long run for passengers. Photo / Getty Images
The reasons behind salary sacrifices are bad news in the long run for passengers. Photo / Getty Images
Qantas boss Alan Joyce has given up his salary for the rest of the financial year — going by last year's numbers that will amount to about $700,000 at least if that's just his basic salary of about $2.2m.
A fortune for most people but for Joyce a small portionof the $24.8m total package for last year.
In what could be seen as a new twist on traditional transtasman airline rivalry, he's bested the $250,000 Air New Zealand's new boss Greg Foran yesterday volunteered to shave off his $1.65m base salary.
While Air New Zealand is maintaining the salary freeze for its top executives, Qantas is slashing executive staff pay by 30 per cent and the same for board fees until June 30. Its chairman will take no fees either.
Qantas has also cut much deeper into its network, slashing capacity by close to 25 per cent across its network until mid-September, the equivalent of grounding 38 of the group's domestic and international aircraft.
Qantas group chief executive Alan Joyce was paid $24.8m last year. Photo / Getty
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.
That's what Air New Zealand reacted to yesterday with further cuts across its network, now amounting to 10 per cent in reduced flying for the next three months.
Qantas' more radical reaction reflects its bigger size — its market capitalisation is twice that of the Kiwi airline and nearly twice the number of planes — but also the fact it has more scope to trim.
Qantas has slimmed down in the last few years but Air New Zealand is still a leaner operation with more efficient planes.
Qantas has a fleet of 12 Airbus A380 Superjumbos — when they're not full they are especially expensive to run and the airline will park eight of them for the next six months.
Rather than exit routes altogether, Qantas will use smaller aircraft and reduce the frequency of flights to maintain overall connectivity. It's prohibitively expensive to restart routes.
Cuts by airlines in this region are relatively small compared to others, especially in Asia. The number of seats available is plummeting.
Qantas will park six of its fuel-hungry A380s until September. Photo / Supplied
Cathay Pacific has more than half of its planes grounded and according to airline intelligence company OAG, it has moved from the 45th largest airline in the world eight weeks ago to 116th, with some 440,000 fewer seats being operated this week.
In China this week there will be 8.6 million scheduled seats operated of which 8.3 million (97 per cent) are domestic seats; current weekly capacity is running at just over half (52 per cent) compared to the week of January 20 and international capacity at just 14 per cent of the levels reported eight weeks ago.
The fastest growing travel market in the world has almost stopped.
The terror attacks of 9/11 was a sharp but shorter shock for air travel — when it temporarily ceased — but the coronavirus crisis will have a deeper and longer impact.
While the fear of contracting coronavirus on planes is real, the science says the chances of contracting it is remote if you follow basic hygiene rules in aircraft with medical grade filters and frequently recirculated high-altitude air.
But it's also the fear of contracting Covid-19 where you land for some and for many more worry about being stranded there which is grounding planes.
That's the short-term impact of the epidemic.
In the medium term and beyond some airlines won't make it through this.
That's why they're cutting capacity and costs as quickly as they can to keep pace with falling demand.
British regional carrier Flybe said the coronavirus outbreak was the final straw which sent it to the wall last week, Italy's Alitalia has been bankrupt since 2017, struggling already in a country that is now shut off completely.
It is shaping up as a period survival of the fittest for airlines and a tough time for their workers. There will be further rationalisation and consolidation in the industry.
While there are promotional air fares around now, when this is all over and travel returns to normal there will be fewer seats, at least initially.
This invariably results in higher underlying fares.
Alan Joyce may not be getting too much sympathy for his salary sacrifice but it's the reasons behind it that are worrying passengers.
