Qantas warns of $150m hit to bottom line as it cuts 15% of flights to Asia

Published: 20 February 2020 - 5 a.m.

Qantas estimates that its net profit in 2020 could be as much as $150 million worse off because of the impact of novel coronavirus, which has stripped demand on flights to Asia.

The airline group announced on Thursday that it was cutting 15% of flights to Asia, which includes 16% of Qantas capacity and 14% of Jetstar capacity on Asia-bound services until at least the end of May.

In its half-year financial results for 2020, Qantas said the reduction in capacity caused by coronavirus could impact the group’s bottom line “somewhere between $100 million and $150 million in the second-half” [of the full-year]”.

Qantas Group CEO Alan Joyce said: “We can extend how long the capacity cuts are in place, we can deepen them or we can add seats back in when demand rebounds, which we know it will.

“Ultimately, when you look across our portfolio, we’re in a much stronger position than many of our peers and that gives us confidence in our business despite some external uncertainty.”

ICAO forecasted this month that the coronavirus outbreak could cause airlines around the world to lose out on a combined estimate of between $4 billion and $5 billion of operating revenues in the first quarter of 2020.

According to its half-year results, Qantas’ underlying profit before tax for the period was $771 million, $4 million lower than the first-half of 2019.

Commenting on the group’s overall performance, Mr Joyce said that Qantas “remains in a strong position”.

“In the domestic market we dealt with some travel demand weakness and a structural change in our overheads from the sale of domestic terminals. Fundamentally, Qantas and Jetstar both did well,” he said.

“Internationally, the growth in passenger revenue outweighed the impact of disruption in Hong Kong and a freight market affected by trade wars. Our ultra-long haul routes like Perth-London continue to perform extremely well.”

Mr Joyce added that the group will be making a final decision on Project Sunrise – Qantas’ ultra-long haul programme – at the end of March.

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