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Qantas (ASX: QAN) has reported a $2.7 billion loss for FY20 amidst what CEO Alan Joyce has described as the worst trading conditions in the airline's 100-year history, with significant losses expected in the current financial year as well.
Despite a few bright spots such as Qantas International actually turning a $56 million profit thanks to record freight performance and a huge increase in e-commerce, the situation has been grim for Australia's leading airline.
"To put it simply, we're an airline that can't really fly to many places - at least for now," says Joyce.
"The impact of that is clear. COVID punched a $4 billion hole in our revenue and a $1.2 billon hole in our underlying profit in what would have otherwise been another very strong result."
Around half of the statutory loss is non-cash, including a $1.4 billion write down of assets including the A380 fleet which are currently in storage in the USA's Mojave Desert, and more than $600 million in redundancies and other costs.
Joyce says COVID-19 will continue to have a huge impact on the business and an underlying loss is expected in FY21. With the exception of New Zealand flights which are still in limbo, international operations are unlikely to restart until at least the following financial year - July 2021.
Qantas collected $267 million in JobKeeper payments this year which helped buffer the pandemic's blow, but the group still had to let thousands of staff go. Joyce highlights these problems are industry-wide.
"It's devastating and it will be a question of survival for many. What makes Qantas different is that we entered this crisis with a strong balance sheet and we moved fast to put ourselves in a good position to wait for the recovery," he says.
"We've had to make some very tough decisions in the past few months to guarantee our future. At least 6,000 of our people will leave the business through no fault of their own, and thousands more will be stood down for a long time.
"Recovery will take time and it will be choppy. We've already had setbacks with borders opening and then closing again. But we know that travel is at the top of people's wish lists and that demand will return as soon as restrictions lift."
Joyce says the FY20 result, including a $124 million underlying profit, shows how the COVID crisis derailed what would have been a strong financial performance.
"We were on track for another profit above $1 billion when this crisis struck. The fact that we still delivered a full year underlying profit shows how quickly we adjusted when revenue collapsed," he says.
"Qantas Loyalty's profit was down less than 10 per cent and member satisfaction increased in the fourth quarter, which shows the strength of that business.
"Qantas Freight has been a major beneficiary of the shift to people shopping online and our charter flying for resources companies is strong."
The airline notes current border restrictions have meant 20 per cent of pre-pandemic capacity is scheduled for domestic operations in August, but recent sales activity shows high levels of latent travel demand for when restrictions are eased.
"Looking further ahead, we're in a good position to ride out this storm and make the most of the recovery," says Joyce.
"Our market position is set to strengthen as the only Australian airline with a full service and low fares domestic offering as well as long haul international services."
Updated at 9:27am AEST on 20 August 2020.
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