Qantas Airways (ASX: QAN) CEO Alan Joyce claims ongoing state border closures have delayed the airline's recovery, cutting $100 million from earnings in the September quarter with expected impacts for the months ahead.
Joyce told the company's annual general meeting (AGM) today capacity was currently below 30 per cent, but if Queensland's border opens to New South Wales in the coming weeks domestic capacity could rise to 50 per cent by Christmas.
"We know that latent travel demand is strong. We saw that with our 'scenic flight' earlier this month, which sold out in 10 minutes," Joyce said.
"And we saw it when South Australia opened to New South Wales, with 20,000 seats selling across Qantas and Jetstar in just 36 hours," he said.
He added the group's domestic share would likely rise organically from 60 per cent to 70 per cent of the business as Virgin Australia changes its strategy. Meanwhile, Qantas Freight has been performing very well with activity "more in-line with the Christmas rush in recent months".
"Some of this is obviously temporary but Australia Post believes the shift to online shopping has been permanently accelerated and freight volumes will be significantly higher going forward which is a great sign for our exclusive, seven-year deal with Post," Joyce said.
As part of Qantas' deal with Australia Post, it will have the first of three A321 freighters arriving, which carry 60 per cent more than its current 737 freighters and are more fuel efficient.
Chairman Richard Goyder highlighted very encouraging signs from the lifting of some restrictions with New Zealand, as well as the potential for travel bubbles with parts of Asia.
"Both Qantas and Jetstar are keeping a close eye on new markets that might open up as a result of these bubbles - including places that weren't part of our pre-COVID network," Goyder said.
"By early next year, we may find that Korea, Taiwan and various islands in the Pacific are top Qantas destinations while we wait for our core international markets like the US and UK to re-open.
"We're already doing this domestically - adding new destinations that suddenly make sense - and it's the kind of flexibility we need to make the most of any cash positive opportunities in the year ahead."
The chairman discussed the tough decisions that had been made for the airline to survive, including the decision to let go of more than 6,000 people while a review contemplates removing another 2,000-plus roles in ground handling.
With 18,000 of its people remaining stood down and revenue having fallen by $4 billion in the fourth quarter of FY20, the group has nonetheless managed to raise billions of dollars to stay afloat.
"Since March, we have raised over $2 billion in secured and unsecured debt," Goyder said.
"In addition to debt, we secured $1.4 billion through our first equity raising in a decade. I'd like to thank shareholders for their support of this raising, which will power our recovery.
"Importantly, we have the liquidity to manage this. And, because our cash flow from continuing operations is positive before one-offs like redundancies, we could continue at this level of flying for a very long time - if we had to," Joyce noted.
Goyder also drew attention to more than 100 repatriation missions to bring Australians home from COVID-19 hotspots around the world.
"The latest one, from London, is due to land shortly. All flown by crew who volunteer. All handled extremely safely. The national carrier at its absolute best," he said.
Updated at 12:18pm AEDT on 23 October 2020.
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