One full year of COVID has been "diabolical" according to the CEO of Australian airline Qantas (ASX: QAN), resulting in the company reporting an underlying loss before tax of $1.82 billion.
The result is a far cry from its pre-COVID FY19 profit before tax of $1.32 billion, and even its FY20 result which was only partially impacted by the pandemic of $124 million.
In addition, total revenue loss from COVID reached $16 billion, and the statutory loss before tax (which includes one-off costs such as redundancies and aircraft write downs) was $2.35 billion.
When the airline was able to operate domestically the company said Qantas and Jetstar were able to generate “significant cash” which helped it reduce net debt from $6.4 billion in February 2021 down to $5.9 billion by the end of June.
In the wake of these heavy losses, Qantas has today outlined its plans to restart international flights which could see travel from Australia to COVID-safe destinations resume from mid-December this year.
"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," Qantas CEO Alan Joyce said.
“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.”
Qantas and Jetstar’s combined underlying EBITDA from domestic flying was $304 million, falling to an underlying EBIT loss of $669 million after non-cash depreciation and amortisation.
The group’s domestic capacity fell as low as 19 per cent in July 2020 before steadily recovering and then peaking at 92 per cent in May 2021, until outbreaks of the Delta variant triggered a series of lockdowns.
Demand was resilient however, with Qantas noticing an uptake in bookings when borders reopened.
Corporate travel demand had recovered to around 75 per cent of pre-COVID levels in May, and to meet the demand Jetstar is bringing in idle Airbus A320 aircraft from Asia and QantasLink accessed capacity via Alliance Airlines’ Embraer E190 aircraft.
Group International (including freight) posted an Underlying EBITDA loss of $157 million, increasing to an underlying EBIT loss of $1.0 billion after depreciation and amortisation.
The international business remained largely grounded for most of FY21 due to the continued closure of Australian borders.
While a travel bubble between Australian and New Zealand did exist for part of FY21, continued outbreaks meant the corridor was heavily restricted at points.
As at 30 June 2021, the group had total liquidity of $3.8 billion – made up of $2.2 billion in cash plus committed undrawn facilities of $1.6 billion.
“Despite the uncertainty that’s still in front of us, we’re in a far better position to manage it than this time last year,” Joyce said.
“We’re able to move quickly when borders open and close. We’re a leaner and more efficient organisation. And our requirement for all employees to be vaccinated will create a safer environment for our people and customers.
“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.”
Qantas outlines international travel restart plans
Looking forward, Qantas is betting on Australia reaching the National Cabinet’s ‘Phase C’ vaccination threshold of 80 per cent in December 2021, which would trigger the gradual reopening of international borders.
“Key markets like the UK, North America and parts of Asia have high and increasing levels of vaccination. This makes them highly likely to be classed as low risk countries for vaccinated travellers to visit and return from under reduced quarantine requirements, pending decisions by the Australian Government and entry policies of other countries,” Qantas said.
“Flights to destinations that still have low vaccine rates and high levels of COVID infection will now be pushed out from December 2021 until April 2022 – including Bali, Jakarta, Manila, Bangkok, Phuket, Ho Chi Minh City and Johannesburg.”
According to Qantas’ international restart plans, from mid-December 2021, flights would start from Australia to COVID-safe destinations, which are likely to include Singapore, the United States, Japan, United Kingdom and Canada.
Further, flights between Australia and New Zealand will be on sale for travel from mid-December 2021 on the assumption some or all parts of the two-way bubble will restart.
From February 2022, Qantas hopes to restart flights to Hong Kong, and the rest of its international network from April 2022.
“The prospect of flying overseas might feel a long way off, especially with New South Wales and Victoria in lockdown, but the current pace of the vaccine rollout means we should have a lot more freedom in a few months’ time,” Joyce said.
“It’s obviously up to government exactly how and when our international borders re-open, but with Australia on track to meet the 80 per cent trigger agreed by National Cabinet by the end of the year, we need to plan ahead for what is a complex restart process.
“We can adjust our plans if the circumstances change, which we’ve already had to do several times during this pandemic. Some people might say we’re being too optimistic, but based on the pace of the vaccine rollout, this is within reach and we want to make sure we’re ready.”
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