Qantas and Jetstar slash flight schedules by a third on weak travel demand

Sluggish domestic and international demand combined with rising Covid cases have led to Qantas and Jetstar cutting capacity by a third with local flights taking the biggest hit.

SYDNEY, AUSTRALIA – NewsWire photos DECEMBER 16, 2021: Market update with Qantas Group Chief Executive Officer Alan Joyce and Chief Financial Officer Vanessa Hudson at Qantas Head Office in Sydney. Picture: NCA NewsWire / Dylan Coker

Sluggish domestic and international bookings have led Qantas and Jetstar to slash capacity across their entire network with local flights taking the biggest hit.

The national carrier had expected domestic flights to have returned to 102 per cent of pre-Covid levels by the 2022 third quarter, but the airline last night announced major cuts to its frequency of service coupled with reductions in aircraft sizes. Domestic capacity has been reduced to around 70 per cent of pre-Covid levels.

Hit by increased travel restrictions in Japan, Thailand and Indonesia, which is mostly impacting Jetstar’s leisure routes, international flights also suffered for the same period and will fall from an expected 30 per cent of pre Covid levels in the third quarter to around 20 per cent of pre-Covid levels. However, London, Los Angeles, Vancouver, Johannesburg and Delhi continued to perform strongly.

“The sudden uptick in Covid cases is having an obvious impact on consumer behaviour across various sectors, including travel, but we know it is temporary,” said Qantas chief executive Alan Joyce in a statement to the ASX last night.

Given the airlines are fully staffed, Mr Joyce acknowledged the financial hit Qantas and Jetstar would cop from the sudden drop in demand from Australian holiday-makers and corporate travellers.

Qantas has reported strong demand for flights to London, Vancouver and Los Angeles. Picture: NCA NewsWire / Christian Gilles

“Our focus on cash positive flying remains, notwithstanding some of the costs that we’ll have to absorb from this sudden drop in demand,” he said.

Qantas will provide an assessment of the financial impact of the cuts to capacity at its half year results late next month saying that by late February it will have a ‘clearer picture’ of the demand levels and the potential loosening or tightening of travel restrictions in overseas countries. It is also keenly anticipating the holiday-maker and corporate travel response to the reopening of Western Australia next month.

It has so far avoided making any material adjustments to its capacity expectations in the 2022 fourth quarter.

On a brighter note Mr Joyce said Qantas and Jetstar had the flexibility to add capacity back if travel demand improves earlier than expected. “ … but 70 per cent still represents a lot of domestic flying and it’s a quantum improvement on the levels we faced only a few months ago,” he added.

Travel agents acknowledged last night that domestic flight bookings are sluggish with leisure air bookings greatly reduced. The only market showing signs of improvement was visiting friends and relatives offshore flights to the Middle East and Europe.

Meanwhile, Qantas said its staff had returned to 100 per cent capacity which will be maintained despite the domestic and international capacity reductions which it claimed would ‘result in a more reliable schedule for passengers.’

Jetstar’s leisure routes have also been impacted. Picture: NCA NewsWire/Jono Searle

Qantas said affected customers will be contacted late January if their bookings is impacted by cancellations and would be offered alternative flights. It said in most cases there would be a difference of a few hours if travelling domestically.

But Qantas is not alone.

Rival airline Virgin Australia cut capacity on its domestic routes by 25 per cent earlier this week due to reduced travel demand and staff isolation criteria.

On Monday, Virgin which has been cancelling numerous flights particularly its popular Cairns to Sydney route over the past week, said it would temporarily suspend ten routes and cut some flight frequencies.

Virgin Australia chief executive Jane Hrdlicka said surging Covid-19 cases were affecting customer confidence.

In a statement she said Virgin Australia remains focused on growing its network and consumer reach and will resume services as soon as travel demand improves.