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Qantas reports $1.7 billion loss, aims for mid-December international restart

The Qantas Group has swung to a full-year underlying pre-tax loss of $1.73 billion as the pandemic continues to majorly weigh on the carrier's finances. Nevertheless, the Group remains bullish around a mid-December restart of international travel.

The Qantas Group has swung to a full-year underlying pre-tax loss of $1.73 billion as the pandemic continues to majorly weigh on the carrier’s finances. Nevertheless, the Group remains bullish around a mid-December restart of international travel.

Group revenue for the 12 months to June 30 slid 58.4 per cent to $5.93 billion as international and domestic border closures due to the virus significantly disrupted air travel.

The airline also warned recent domestic and trans-Tasman border closures will result in a $1.4 billion hit to group earnings in the first half of 2021/222.

Qantas also said it would extend the stand-downs of domestic crew and airport staff beyond the eight weeks – as previously announced – if borders remain closed.

Periods of open domestic borders in the second half saw significant cash generation by Qantas and Jetstar, which helped the Group to reduce net debt from $6.4 billion in February 2021 down to $5.9 billion by the end of June.

Qantas Group CEO Alan Joyce said: “This loss shows the impact that a full year of closed international borders and more than 330 days of domestic travel restrictions had on the national carrier. The trading conditions have frankly been diabolical.

“It comes on top of the significant loss we reported last year and the travel restrictions we’ve seen in the past few months. By the end of this calendar year, it’s likely COVID will cost us more than $20 billion in revenue.

“We’ve had to make a lot of big and difficult structural changes to deal with this crisis, and that phase is mostly behind us. As a result, we’re geared to recover quickly, in line with a national vaccine rollout that is speeding up.”

Despite the $1.7 billion loss, investors today are still seeing hope from the rising vaccination rate in Australia and had lifted shares by 2.87 per cent at the time of writing.

The Qantas Group looks ahead

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Qantas ‘Fly Away’ Campaign

Qantas says that recent outbreaks and associated domestic and trans-Tasman border closures are expected to have an impact in the order of $1.4 billion on the Group’s results in the first half of the financial year for 2022.

The airline assumes that borders in Victoria and New South Wales will re-open in early December 2021 with the carrier saying that if borders open earlier and flying returns more quickly, capacity can be adjusted accordingly.

Unfortunately, the extended border closures will also extend the stand-downs of domestic crew and airport staff beyond the eight weeks previously announced – however, no job losses are expected.

Vaccination rates are expected to reach 70 per cent of the eligible population during November, enabling domestic lockdowns and border restrictions to be steadily eased.

Qantas and Jetstar domestic capacity are expected to increase from 38 per cent in Q1 (July-Sep) to 53 per cent of pre-COVID capacity in Q2 (Oct-Dec) and rise to ~110 per cent in 2022.

International border closures and quarantine restrictions are expected to ease once 80 per cent of eligible Australians are vaccinated from mid-December 2021.

Qantas International flying in the first half 0f 2022 is expected to be at approximately 15 per cent of pre-COVID levels (through government-sponsored freight services and repatriation flights).

Once Australia’s borders start to reopen, the Group says International capacity is expected to be 30 to 40 per cent in Q3 (Jan-Mar) and 50 to 70 per cent in Q4 (Apr-Jun) compared with pre-COVID levels.

“When Australia reaches those critical vaccination targets later this year and the likelihood of future lockdowns and border closures reduces, we expect to see a surge in domestic travel demand and a gradual return of international travel,” said Mr Joyce.

Qantas and Jetstar domestic update

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Demand proved resilient throughout the year, with quick uptake in bookings when domestic borders re-opened. The Group has announced 46 new domestic routes since the start of the pandemic, many to regional destinations, in response to a boom in leisure travel driven largely by the closure of international borders.

Corporate travel demand had recovered to around 75 per cent of pre-COVID levels in Mayand Qantas won an additional 34 major accounts across the year. Demand from business, along with leisure travel, is expected to bounce back strongly once lockdowns end.

To better meet this demand, Jetstar is bringing in idle Airbus A320 aircraft from Asia and QantasLink accessed capacity via Alliance Airlines’ Embraer E190 aircraft.

Frequent Flyer

Qantas Frequent Flyers

In a year with minimal air travel, the total number of Frequent Flyer members grew by almost 200,000 to reach 13.6 million.

Qantas Loyalty continued to perform well, generating over $1 billion in gross cash and achieving record member satisfaction.

While opportunities to redeem Qantas Points in the air were limited, there was extremely strong demand when borders did open.

Between January and lockdowns in June, redemption levels on domestic flights were 30 per cent above pre-COVID levels.

Members remained highly engaged, earning and redeeming large volumes of points on the ground. Spending on credit cards linked to Qantas Points returned to pre-COVID levels in the fourth quarter and over 500,000 members have now earned points through the partnership with bp Australia.

There were record levels of points redeemed via Qantas Wine and the Qantas Store, in line with broader consumer trends.

Staffing

Qantas

A total of 9,400 people have now left the Qantas Group since the pandemic began – an increase on the prior estimate of 8,500 largely due to offshore job losses at airports and sales offices, some automation and an increase in voluntary redundancies.

Approximately 6,000 employees associated with international flying remain stood down due to the closure of Australia’s external border, while an additional 2,500 employees are stood down as a result of domestic restrictions. Federal Government income support is available to Australian-based employees during this acutely challenging time.

“Things remain tough, especially for thousands of our people waiting to return to their jobs when borders open and hopefully stay open. Our focus is getting them back to work as soon as possible, which is why we were ramping up our flying and adding new destinations before the most recent lockdowns.

“I’d like to specifically recognise everyone across this company, for dealing with a huge amount of upheaval due to this crisis and showing enormous commitment and professionalism in the process. Our people maintained an absolute focus on safety and on serving our customers, who have likewise been extremely understanding as we’ve all gone through this difficult period,” said Mr Joyce.

Read the full report here.