View Full Version : Qantas to cut routes, Shares plunge

28th Mar 2003, 07:35
Friday March 28, 7:47 AM


Qantas said today the war in Iraq and the effects of Severe Acute
Respiratory Syndrome in Asia had continued to adversely affect

Qantas Chief Executive Officer Geoff Dixon said that, as a result,
Qantas would further reduce planned international flying by a total
of up to 20 per cent between 1 April and mid-July.

Mr Dixon said that when the company announced its half-year results
on 20 February it stated that Qantas was still on track to achieve
its full year profit target despite pressure from the heightened
tensions surrounding Iraq and the very public threat of terrorism.

"We cautioned at the time, however, that if tensions continued around
Iraq and terrorism, bookings could deteriorate further and, in such
an environment, our profit target would become more difficult to
achieve," he said.

Mr Dixon said this was now a reality and, on current indications,
Qantas would be unable to meet market expectations for the full year
profit result.

"We continue to maintain high levels of liquidity and a strong
balance sheet," he said. "The company will still record a strong
result for the year ended 30 June 2003 and will remain one of the
most profitable airlines in the world.

"We also remain well positioned to maximise opportunities when the
global travel market recovers."

Qantas would continue to monitor events closely and make additional
changes as necessary.

The interim Qantas schedule, which is effective for varying periods
between 1 April and mid-July, includes:

* reduction of UK services from 21 to 17 per week;

* reduction of Rome services from three to two per week;

* reduction of Paris services from three to two per week;

* reduction of Australia-Los Angeles services from 28 to 25 per week;

* deferral of the Qantas Chicago extensions which were due to
commence on 31 March;

* suspension of the airlines twice-weekly Brisbane-Hong Kong
services, and suspension of four Sydney-Hong Kong services each week
(reducing services from 30 to 24 per week);

* adjustments to flight frequencies from Sydney, Cairns and Melbourne
to Japan resulting in a 20 per cent capacity reduction (Qantas will
continue to operate 17 services to Japan each week); and

* deferral of a range of planned increases to services on existing
routes. Some of the international capacity will be redeployed to
domestic operations. Mr Dixon said that, as announced previously,
Qantas had implemented a number of initiatives to mitigate the
effects of the downturn including:

* use of accumulated annual leave to reduce staffing between now and
30 June 2003 by the equivalent of 2,500 full time employees;

* permanent staff reductions through attrition and not filling vacant

* a freeze on the hiring of new staff; and

* a freeze on discretionary expenditure.

"The severity of the downturn could require us to consider further
initiatives," Mr Dixon said. "If this does become necessary, we will
hold discussions with our staff and Unions."
Qantas shares down 38c to $2.94

28th Mar 2003, 20:48
Fri "Dow Jones"

Qantas' Japan, U.K. Routes Hardest Hit

Qantas said its bookings came under fire as the world moved closer to the outbreak of war in Iraq.

"As soon as the war looked likely bookings dropped off quite substantially, quite substantially, and as the war has continued over an eight-day period as you're seeing all around the world, not just in Australia, bookings are dropping off at a quicker rate," Dixon said, noting the double whammy of SARS.

Dixon said Qantas' number of seats filled has dropped 12% from a year earlier with the biggest drops on its Japan and U.K. routes. Inbound traffic to Australia from Japan is down about 30%, while inbound traffic from the U.K. is down 18%.

In recent days, Qantas also has seen a sharp drop in bookings in Hong Kong, which has been a strong earnings generator for the airline, following the growing public awareness of SARS and some fatalities due to the epidemic.

"The last three days have been quite horrendous (for bookings in and out of Hong Kong)," Dixon said.

Qantas will cut weekly flights from Australia to the U.K. to 17 from 21 and reduce flights to Rome and Paris to three from four. It will also cut services to Los Angeles to 25 a week from 28 and has deferred its plan to fly to Chicago, which was due to start Monday.

The Sydney-based airline has also suspended its twice-weekly Brisbane-Hong Kong services as well as four Sydney- Hong Kong flights each week. Qantas has also cut services from Sydney, Cairns and Melbourne to Japan by 20%. It will operate 17 services to Japan each week.

Qantas bookings to the U.S. were slightly up, Dixon said.

Chief Financial Officer Peter Gregg said the outbreak of war in Iraq is a bigger blow to the carrier than Sept. 11, 2001.

Qantas managed to offset the sharp downturn in travel following the terrorist attacks by redeploying planes to Australia, which was desperate for additional capacity following the grounding of the nation's second-biggest airline, Ansett Australia just a few days after Sept. 11.

It is "tougher for us because you might recall we had benefits of Ansett's collapse. In 9/11 we were able to put the capacity back into the domestic market to carry the Ansett passengers. This time we don't have that benefit unless you know something about Virgin (Blue we don't)," Gregg told reporters.

Qantas Eyes Domestic Market

Still, Dixon said some of its international capacity will be redeployed to the domestic operations, which is likely to hurt rival Virgin Blue's operations.

Qantas is hoping to build-up its 70% local market share in a bid to offset falling demand for its international services.

"We had planned, and there will be some initiatives later, to stimulate the domestic market, which has been flat for about three months," Dixon said. "We certainly feel that the market can be stimulated, particularly the local holiday market."

He was coy about whether that means more cheap fairs on some flights where it directly competes against no-frills Virgin Blue, but insisted that the measures will be profitable.

Virgin Blue, which is jointly owned by Australian transport group Patrick Corp. and British businessman Richard Branson, may also have to delay its expansion offshore.

Virgin Blue wasn't immediately available for comment.

Patrick shares dropped 39 cents, or 3.1%, to A$12.15 on jitters about its investment in Virgin Blue.

Meanwhile, the Centre for Asia Pacific Aviation said the outbreak of SARS is a major issue for airlines in the region.

"Intra-Asian traffic has been only relatively lightly affected by the Iraq conflict, but SARS is a real threat to traveler confidence in specific markets," the center said in a report.

However, despite the gloomy outlook, Qantas has no plans to cut services offered by its international single-class offshoot, Australian Airlines. Its expansion will continue as scheduled, Dixon said.

Layoffs also aren't on the agenda yet, but Dixon warned there may be permanent staff cuts if its bookings come under further pressure, noting unpaid leave may also be an option.

Qantas has already frozen the appointment of new staff to vacant and existing positions as well halting discretionary spending.

Dixon remained adamant that Qantas will survive the sharp downturn, saying, "We also remain well positioned to maximize opportunities when the global travel market recovers."

-By Lilly Vitorovich; Dow Jones Newswires;

61-2-8235-2963; [email protected]

-Edited by Melanie Botts

Clapped-out Classic
28th Mar 2003, 21:08
Any thought given to alternative routings to the UK?

The Great Circle Mapper reckons that SYD-BNE-YVR-LHR would be about 1920 miles further than SYD-BKK-LHR but at least you'd be staying out of the SARS-affected area & going nowhere near the conflict zone.

SYD-HNL-LHR is another 200 miles shorter still.

In both cases, the longest leg appears to be shorter than MEL-LAX.

29th Mar 2003, 13:30
I guess all those hopefuls holding their breath for the next QF intake or cadet course can relax the sphincter for a while, while the cycle turns yet again.

WhiteRat Wannabe
29th Mar 2003, 14:11
It sounds like recruitment is on hold until at least the end of the financial year:(

30th Mar 2003, 05:39
According to an article published in "The Daily Telegraph" 29/03/03 Qantas have cancelled all flights to Hong Kong

[Locked out of Australia 29/03/03 - The Daily Telegraph - (http://www.news.com.au/common/story_page/0,4057,6205568%255E421,00.html)

The warning came as Qantas announced it was cancelling all flights to Hong Kong due to the spread of the disease.

I can't find reference to this anywhere else, is it correct....

Apollo 4
30th Mar 2003, 05:44
Wonder if the over paid and under worked F/A's are paying attention to the global aviation trend. Guess they will still want their 13% ......

30th Mar 2003, 06:37
This is yet another canny time for the shrewd investor.
Purchased a wad of QF shares and call options post 9/11 for about $2.68 (the shares) and sold later for upwards of $3.95.
The options did bloody well also.

At $3.00 per share I believe they represent very good value for money as all the mechanisms are in place for future growth as well as reduced expenditure.

In the prophetic words of Allan Greenspan " the markets of the world are susceptible to wild fluctuations thanks to panic selling by emotional and uninformed investors............... and many a wealthy individual has profited through their stupidity"

31st Mar 2003, 06:49
Good point about being a shrewd investor and well done on the profits.

But try as I might I cannot see anything stopping Virgin taking out the vast majority of the narrow body Qantas dometsic operation and from there...?

So I think any profits would be best taken quickly. There's long term viability issues that are long overdue for attention