Qantas chief executive Alan Joyce says the coronavirus outbreak will hit Australia’s economy harder than the global financial crisis and staff could potentially be redeployed to stock supermarket shelves.
The national carrier announced on Thursday it will be suspending all international flights and standing down two-thirds of its 30,000 workers in the face of the escalating COVID-19 pandemic.
“This is the worst crisis the aviation industry has gone through,” Mr Joyce told ABC’s 7.30 program.
“I know for the economy it’s probably going to be a lot worse than the GFC.” Mr Joyce defended the decision to stand down about 20,000 workers, saying the company was allowing them to access to long service leave and take leave in advance.
“At the end of the day, we’re protecting these jobs,” he said. “We’re not making people redundant and we’re trying this mechanism to make sure we can get through and survive and they have a job at the end of the day.
He told Leigh Sales he had been speaking to Woolworths CEO Brad Banducci about redeploying some of Qantas workers.
“He (Mr Banducci) thinks Qantas employees are ideal employees to have in loading shelves,” Mr Joyce said.
Qantas international flights will be suspended from the end of March until May and domestic services will be cut by 60 per cent. The cuts also apply to Qantas’ subsidiary Jetstar.
More than 150 aircraft will be temporarily grounded, including all Qantas’ A380s, 747s and 787-9s, and Jetstar’s 787-8 fleet.
About 20,000 Qantas and Jetstar staff will be stood down during that time. Qantas said in a statement to the ASX this morning the decision was made to “preserve as many jobs as possible longer term”.
It’s understood staff will be able to use annual and long service leave but some staff will have to endure leave without pay.
“Employees with low leave balances at the start of the stand down will be able to access up to four weeks’ leave in advance of earning it,” the statement from Qantas said.
“Unfortunately, periods of leave without pay for some employees are inevitable.”
Qantas said senior executives and board members will now receive no salary until at least the end of this financial year, joining chief executive Alan Joyce and chairman Richard Goyder in taking no pay. Annual management bonuses have also been cancelled.
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Earlier this week Qantas said it was cutting its international capacity by 90 per cent and domestic by 60 per cent, across Qantas and Jetstar.
“With the Federal Government now recommending against all overseas travel from Australia, regularly scheduled international flights will continue until late March to assist with repatriation and will then be suspended until at least the end of May 2020,” Qantas said this morning.
“As the national carrier, Qantas is in ongoing discussions with the Federal Government about continuation of some strategic links.”
The company said essential domestic, regional and freight connections would be maintained “as much as possible”.
Qantas Loyalty’s operations will not be affected by the cuts announced this morning.
Qantas shares have lost nearly two-thirds in value so far in 2020 and were worth $2.53 before Thursday’s open.
However the Transport Workers’ Union (TWU) has accused the airline of “forcing its own workforce to bail it out”.
“This plan is designed to wipe the slate clean on all worker entitlements, including long-service leave and accrued benefits,” TWU national secretary Michael Kaine said.
“This will set the company up for a massive boost when the crisis is over, which will see shares go through the roof and executives back to massive bonuses. Meanwhile workers will have lost the benefits that many worked so hard to build up.”
AIRLINES IN CRISIS
Qantas’ cuts come one day after Virgin Australia said it was suspending its international service due to the fallout from coronavirus.
Virgin Australia said all international travel would be suspended from March 30 to June 14 and domestic capacity across Virgin and Tigerair would be cut by 50 per cent.
“We have entered an unprecedented time in the global aviation industry, which has required us to take significant action to responsibly manage our business while balancing traveller demands and supporting the wellbeing of Australians,” Virgin Australia managing director Paul Scurrah said in a release to the ASX on Wednesday.
The airline had already suspended full-year earnings guidance and flagged reductions in its Los Angeles, Japan, and trans-Tasman services, as well as announcing the exit of Auckland services to and from Tonga and the Cook Islands.
Virgin’s Melbourne to Los Angeles services will be suspended from March 20 while the inaugural Brisbane to Tokyo, and Melbourne to Denpasar services will be postponed from March 29.
Regional Express Airlines, or Rex, has also warned it faced an uncertain future as it reeled from a downturn in travel due to the pandemic.
Rex — Australia’s biggest regional carrier — entered a trading halt on Tuesday and called on federal government assistance, saying the impact of the virus on the company was “severe”.
“Rex, like most businesses in Australia is already seeing the severe impact of the drop in business due to COVID-19. Just this past Friday we saw our passenger numbers dropping 13 per cent year-on-year,” Rex chief executive Neville Howell said in an open letter to Deputy Prime Minister Michael McCormack.
“One cannot even begin to comprehend what the economic impact will be if the infection rate rises to high double digits.”
$715 MILLION GOVERNMENT LIFELINE
Yesterday, the federal government announced a $715 million lifeline to help the Australia’s ailing airlines through the coronavirus pandemic. A range of government charges will be refunded and waived to help airlines under immense pressure as domestic and global travel plummets.
The government will forgo fuel excise, air service charges and regional security fees.
The move is expected to create an upfront benefit of $159 million, with the government refunding charges paid since February 1.
Australia’s airlines have been rocked by the virus, with massive cuts to services as economic shock ripples through the industry.
Deputy Prime Minister Michael McCormack said the package was designed to put Australia in the best position to deal with the coronavirus outbreak. “Our airlines run on tight budgets at the best of times and these past few weeks have been particularly tough,” he said on Wednesday.
“I’ve been speaking with Australian airline executives every day and will continue to work with them to make sure they receive the support they need.”
Qantas chief executive Alan Joyce said Mr McCormack had worked closely with the airlines to design the package.
“The fact it’s retrospective gives us an immediate cash benefit as we deal with falling revenue, and it’s sized according to each airline,” he said. “There are some tough weeks and possibly months ahead, but our focus is on getting through that so we’re ready to help with the recovery on the other side.”
Labor leader Anthony Albanese said he understood airlines were seeking assurances from the government in regard to bank loan arrangements. “One of the things that’s important for the airlines is that people have the confidence to be able to book on an airline, knowing that that airline is secure in terms of its future,” he said.
Transport Workers Union secretary Michael Kaine warned waving fees for airlines would not save jobs.
“The package announced last night is what you get when you only talk to well- paid airline executives and refuse to speak to the wider industry or workers,” he said.
“The window of opportunity to act in aviation, which is our critical gateway to the globe, is closing fast.” Mr Kaine said companies representing thousands of baggage handlers, ramp workers, caterers, cleaners, drivers, cabin crew and security personnel are facing a tough challenge.