Qantas takes $429m earnings hit from lockdowns

Qantas takes $429m earnings hit from lockdowns

Qantas Airways (ASX: QAN) is getting close to its usual cruising altitude for domestic capacity thanks to "extremely strong leisure demand", but Australia's leading airline is counting the cost of lockdowns over the Christmas-New Year period and in the lead-up to Easter.

In an update released today the group estimated $400 million in lost earnings due to restrictions in Greater Sydney, as well as the ensuing border closures and blow to consumer confidence, over the peak Christmas and New Year travel period.

Qantas notes the recent Greater Brisbane lockdown on the eve of the peak Easter travel period was much shorter and met with far more measured responses from various states, but it still had a negative impact of around $29 million on EBITDA.

"As the recent lockdown in Brisbane showed, airlines and many other sectors remain vulnerable to snap travel restrictions until Australia's vaccination rollout is complete," Qantas CEO Alan Joyce said.

"The vaccination program is absolutely key to restarting international flights in and out of Australia.

"While there have clearly been some speedbumps with the vaccine rollout, we are still planning for international flights to resume in late October. We remain in regular dialogue with the Government."

Today Qantas has also announced it will reopen its international First lounges in Sydney and Melbourne, along with its Premium Lounge in Brisbane, on 19 April.

In further encouraging news, Qantas' domestic capacity increasing beyond previous estimates to reach 90 per cent of pre-COVID levels in the current quarter. As a result, the company claims all Qantas and Jetstar staff are back at work.

The group said the opening of a two-way travel bubble with New Zealand was allowing more parts of the business to be brought back from hibernation, with thousands of bookings made in the first few days from the announcement more flights opening up from late May to meet expected demand over the ski season.

"The increased domestic flying and resumption of flights across the Tasman are also helping get more of our people back to work," Joyce said.

"The two-way bubble with New Zealand is great news for the tourism sector as a whole. It means we can bring other parts of our business out of hibernation, like our aircraft and First lounges in Australia."

Joyce said the airline was now seeing really positive signs of sustained recovery.

"This is the longest run of relative stability we've had with domestic borders for over a year and it's reflected in the strong travel demand we saw over Easter and the forward bookings that are flowing in each week from all parts of the market," he said.

"The Australian Government's half-price fares program is having a direct and indirect impact on the sector.

"The direct response to the program has been fantastic, with over 250,000 fares sold in the first two weeks.

A big spike in travel demand was seen even before the fares went on sale as the half-price fares announcement gave people confidence, according to Joyce.

"Corporate travel, including the small business segment, is now back to around 65 per cent of pre-COVID levels, and increasing month-on-month.

"It's important to keep this uptick in perspective. We are still facing a massive financial loss this year, which will be the second one in a row. We've lost more than $11 billion in revenue since the pandemic started and that number will keep growing until international travel recovers.

"We've used debt and shareholder equity to get through to this point, and our people have had the benefit of direct government support, which continues for those still stood down due to international border closures."

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