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Economy

Australia, New Zealand airlines slash schedules after fresh travel restrictions

imageEconomy2 hours ago (Mar 15, 2020 07:26PM ET)

Australia, New Zealand airlines slash schedules after fresh travel restrictions

By Jamie Freed

SYDNEY (Reuters) – Airlines in Australia and New Zealand said on Monday they would make drastic changes to their flying schedules after the countries over the weekend announced international travelers would need to self-isolate for 14 days due to the coronavirus.

The strict measures are designed to slow the spread of the pandemic, which led the Reserve Bank of New Zealand to unexpectedly cut the official cash rate by 75 basis points to 0.25% on Monday.

Air New Zealand Ltd (NZ:AIR) said job losses would be necessary as it cut long-haul capacity by 85% over the coming months, suspending flights to destinations including San Francisco, London, Buenos Aires, Honolulu and Tokyo.

The airline will also cut flights to Australia and reduce domestic capacity by 30% in April and May.

“We are now accepting that for the coming months at least Air New Zealand will be a smaller airline requiring fewer resources, including people,” Air New Zealand Chief Executive Greg Foran said in a statement.

The airline has halted trading in its shares until Wednesday.

Auckland International Airport Ltd (NZ:AIA) suspended its earnings guidance for the current financial year ending June 30, citing the “unprecedented scale” of the border restrictions announced on Saturday. Shares plunged to a four-year low.

Qantas Airways Ltd (AX:QAN) said it would be making fresh cuts to its flying schedule beyond those announced last week due to the new travel restrictions, which it said would have a major impact on domestic and international demand.

“We’ve moved immediately to offer a booking waiver to our customers and we’re working through the implications for our schedule now given the expected impact on demand, with a view to announcing more detail as soon as possible,” a Qantas spokesman said in a statement.

Qantas had last week announced it would cut its international capacity by nearly 25% over the next six months.

UBS analysts said the latest travel restrictions would have a significant effect on Qantas’ international traffic, which historically accounted for around 45% of revenue and 25% of earnings before interest and tax.

“A downside scenario where international traffic is down 50% for a whole year and domestic down 30% could result in cash burn of up to A$200 million ($123.60 million) per month after incorporating changes to the business,” UBS said of Qantas.

Smaller rival Virgin Australia Holdings Ltd (AX:VAH), which has a weaker balance sheet but a heavier domestic focus, said it was assessing its response to the new travel restrictions.

Virgin said on Friday it would make deeper capacity cuts, suspend financial guidance, freeze hiring and offer leave without pay to staff.

Australia, New Zealand airlines slash schedules after fresh travel restrictions

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