Qantas says it will reduce capacity by almost a quarter for the next six months due to fears over COVID-19, including grounding 38 aircraft.

Key points: Qantas says international flight bookings have dropped off significantly as coronavirus spreads

Qantas says international flight bookings have dropped off significantly as coronavirus spreads The group executive team will take pay cuts over the next financial year

The group executive team will take pay cuts over the next financial year The airline has encouraged staff to use paid leave or consider taking unpaid leave as less work becomes available

The airline said there had been a "sudden and significant drop" in demand for flights and that it must reduce the frequency of flights as well as the size of aircraft.

In a statement, the airline said: "The latest cuts follow the spread of the coronavirus into Europe and North America over the past fortnight, as well as its continued spread through Asia."

As part of the cutbacks Qantas will:

Ground 38 aircraft, including eight A-380s

Ground 38 aircraft, including eight A-380s Re-route services to London, flying via Perth instead of Singapore

Re-route services to London, flying via Perth instead of Singapore Ask staff to take annual leave and unpaid leave

Qantas CEO Alan Joyce said while redundancies were a last resort, the changes meant about 2,000 jobs were now surplus to requirements.

He also said the senior leadership team will take a pay cut of 30 per cent, in order to "pull every lever that we can to make sure that the group gets through this environment".

"This will be a survival of the fittest," he said.

Qantas said the biggest reductions would be made to Asian routes, where travel demand is down 30 per cent compared to the same period last year.

Services to the US, UK and New Zealand will also decrease.

Jetstar will make significant cuts to its international network by suspending flights to Bangkok and reducing flights to Vietnam and Japan by almost half.

Both Qantas and Jetstar's domestic service reductions will be increased from 3 per cent to 5 per cent.

Mr Joyce said there had been a "sharp drop" in international bookings over the past fortnight.

"Less flying means less work for our people, but we know coronavirus will pass," he said.

In addition to the service cuts, the Qantas chairman will take no fees and the Group CEO will take no salary for the remainder of the financial year.

Mr Joyce said the airline was prepared for the drop in demand to get worse.

"We can take more capacity out, for example we're still flying two of the A-380s out of the 10, we're are still flying the 747s.

"We have the ability to be very aggressive if we need to be on capacity.

"Similarly we're trying to maintain the flexibility if a recovery did occur to put the capacity back in."

Customers affected by the changes to flying schedules will be contacted directly by Qantas or Jetstar over the next week unless they booked through travel agents.

Qantas and Jetstar will waive change fees for new international bookings made from Tuesday until the end of March.

Mr Joyce said Qantas will work with partners American Airlines to provide alternate routes for passengers booked up until September.

Almost 100 Australians have now tested positive for coronavirus, around half of them in NSW.

Smart Traveller is advising Australian citizens and permanent residents to self-isolate if they've travelled in China, South Korea and Iran.