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  • Qantas (QAN) has entered a trading halt today after announcing it will axe at least 6000 jobs in response to COVID-19
  • The airline giant also announced it will launch a $1.9 billion capital raise and ground around 100 aircraft for up to 12 months
  • Separate to the job losses, around 15,000 staff will either be temporarily stood-down, take annual leave, or go on leave without pay
  • On the back of a $771 million underlying profit in the first half of the financial year, Qantas is expecting to have a full year result between breakeven and a slight profit
  • In March, Qantas announced it would postpone its interim dividend, however, it today stated it will cancel it altogether and will use the money to maintain strong liquidity
  • Finally, Alan will remain CEO at least until the end of FY23 to allow the company to remain stable as this challenging period is navigated
  • Qantas shares last traded for $4.19 in a $6.246 billion market cap

Qantas (QAN) has entered a trading halt today after announcing it will axe at least 6000 jobs in response to COVID-19.

The airline giant also announced it will launch a $1.9 billion capital raise and ground around 100 aircraft for up to 12 months.

Qantas will implement a three-year plan to accelerate its recovery from COVID-19 and aim to keep as many jobs as possible.

Primary aims include resizing its fleet due to drastically reduced flying, restructuring to save costs, and recapitalising to strengthen its financial position.

“The Qantas Group entered the crisis in a better position than most airlines and we have some of the best prospects for recovery, especially in the domestic market, but it will take years before international flying returns to what it was,” CEO Alan Joyce commented.

“We have to position ourselves for several years where revenue will be much lower, and that means becoming a smaller airline in the short term,” he said.

Staff impact

Separate to the job losses, around 15,000 staff will either be temporarily stood-down, take annual leave, or go on leave without pay.

This will allow Qantas to keep as many jobs as possible and respond faster if flying resumes more quickly.

However, of the company’s 29,000 staff, around 8000 are expected to return by the end of July, with this number increasing to 15,000 by the end of 2020 and further still as travel slowly returns to normal.

Qantas is hoping to reach 21,000 active employees by June 2022.

At least 1500 jobs will be lost in ground operations, at least 1450 will be lost in corporate roles, around 1050 cabin crew staff will lose their jobs, 630 engineers will be without their positions, and at least 220 pilots will lose their jobs.

Some contractors and IT staff will also lose their jobs.

“Adapting to this new reality means some very painful decisions. The job losses we’re announcing today are confronting. So is the fact thousands more of our people on stand-down will face a long interruption to their airline careers until this work returns,” Alan said.

“What makes this even harder is that right before this crisis hit we were actively recruiting pilots, cabin crew and ground staff. We’re now facing a sudden reversal of fortune that is no one’s fault, but is very hard to accept,” he added.

FY20 financial performance

After generating $771 million in underlying profit before tax in the first half of FY20, Qantas saw a significant drop in the second half.

As a result of taking quick action in spending, the company expects a full-year result between breakeven and a small underlying profit.

Cancellation of interim dividend

On March 19, Qantas announced that it would defer its $201 million dividend payments until September.

However, the company today announced it is cancelling it altogether and will use the funds to maintain strong liquidity.

Decisions regarding future dividends will be made in consideration with Qantas’ finances.

Capital raise

This $1.9 billion capital raise will be completed via a placement and share purchase plan, with the money to be used to speed-up recovery and strengthen its balance sheet.

Placement

A total of 372.7 million shares, representing roughly 25 per cent of existing shares on issue, will be issued to raise $1.36 billion.

Shares will be priced at $3.65 each, which represents a 12.9 per cent discount to the last trading price of $4.19 from June 24.

The placement is expected to settle on June 30 and shares will be allocated and can begin trading on the ASX on July 1.

Share purchase plan

The share purchase plan has been capped at $500 million, with shareholders able to purchase up to $30,000 worth of shares without incurring any brokerage, transaction and commission costs.

However, if more than $500 million is raised, Qantas is able to accept more applications.

Shares will be priced at less than the placement and have a 2.5 per cent discount to the five-day volume-weighted average price up to and including the closing date.

The share purchase plan is expected to open on July 2 and close on July 22. Shares will then be allocated on July 29 and can begin trading on the ASX on July 30.

CEO tenure

Finally, Alan will remain CEO of the company at least until the end of FY23. This will allow Qantas to remain stable as this challenging period is navigated.

Despite all of these changes, Alan said the company is hopeful about the future.

“Despite the hard choices we’re making today, we’re fundamentally optimistic about the future,” he stated.

“As a business, recapitalising means we can get ready sooner for new opportunities, returning to profit and building long term shareholder value,” Alan said.

“As the national carrier, we remain committed to supporting tourism, connecting regional communities and safely flying millions of people every year,” he added.

Qantas shares last traded for $4.19 in a $6.246 billion market cap.

QAN by the numbers
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