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- After reporting a whopping $1 billion loss, Qantas (QAN) is focussing more on its plans for “major restructuring” over the next three years
- Virtually all international travel and around 70 per cent of domestic flights were wiped out by COVID-related restrictions, and Qantas was hit heavily by a $7 billion drop in revenue
- Of the limited number of occasions Qantas was able to fly domestically, 99 per cent of the time it generated positive cash flow
- International flights are scheduled to resume in October, with those to New Zealand set for a “material increase” in July
- The airline’s restructuring plan is expected to save around $1 billion each year from the 2023 financial year onwards
- Qantas is up 4.59 per cent to $5.24 per share
After reporting a whopping $1 billion loss, Qantas (QAN) is focussing more on its plans for “major restructuring” over the next three years.
The embattled airline operator had posted a $445 million after-tax profit the year before, but with virtually all international travel and around 70 per cent of domestic flights wiped out by COVID-related restrictions, Qantas was hit heavily by a $7 billion drop in revenue.
Chief executive Alan Joyce said the figures were “stark but not surprising.”
“The fact that we were able to limit a $7 billion drop in revenue to a bottom line loss of circa $1 billion says a lot about how the Qantas Group is managing this crisis.”
“That sounds like a strange metric for success — especially for an airline that was delivering near-record results before COVID. But if you look around the world, airlines are confronting losses that are far bigger.”
Of the limited number of occasions Qantas was able to fly domestically, 99 per cent of the time it generated positive cash flow.
This, Joyce explained, demonstrated two key things. First, that people remain keen to travel when a safe opportunity presents itself and, second, that the airline is managing its network and costs effectively.
But the drop in travel wasn’t all bad for Qantas. With such a huge slide in international flights, an equally massive shortage in cargo developed, which sent the price of freighter space soaring. The airline was then able to take advantage of the price spike, driving its Qantas Freight segment to what Joyce described as “a record result” and helped offset many other costs.
With the launch of Australia’s vaccine program this week, as well as others around the world, international flights are scheduled to resume in October, with those to New Zealand set for a “material increase” in July.
Domestically, Qantas has had a number of discussions with several Premiers and Chief Ministers about interstate travel. Chief among its queries was whether the vaccine rollout would eliminate the need for future border closures, and could a declaration like that be made as soon as April?
The airline said an “assurance like that is worth pursuing” since it would both accelerate the recovery in key parts of the economy and provide certainty for businesses and people. But, so far, no such assurance has been given.
Even with a gradual recovery now visible, Qantas has taken some hefty blows over the last six and 12 months and said it would focus more on its plan for a major restructuring, which is estimated to save around $1 billion each year from the 2023 financial year onwards.
In the near-term, Qantas is targeting annual savings of roughly $600 million, but such a sweeping plan requires the standing down of at least 8500 people. 5000 have left so far, with the rest due to depart by the end of the 2021 financial year.
“At the same time as managing the daily realities of this pandemic, we’ve also redesigned our business,” Joyce said.
“These changes mean the Qantas Group of 2021 will be able to repair itself much faster than a pre-COVID Qantas Group could.”
Over the rest of the 2021 financial year, domestic travel is expected to increase to 60 per cent of pre-COVID levels in the third quarter and to 80 per cent in the fourth.
International capacity, on the other hand, is at 8 per cent of pre-COVID levels and is unlikely to materially increase in the second half of 2021. That said, Qantas added that this level of activity reduces costs and the lead time for re-activating its international network.
Qantas is up 4.59 per cent to $5.24 per share at 11:26am AEDT.
