The Qantas Group announced on Thursday a comprehensive recovery plan for a stronger future in the post-pandemic environment. The carrier plans on reducing their workforce by up to 6,000 and will raise up to $1.9 billion in new equity.
Today, Qantas announced a comprehensive recovery plan to weather the global COVID-19 pandemic and emerge stronger in the post-pandemic environment. The carrier’s strategy includes $15 billion in cost reductions over the next three years and $1 billion in annual savings from 2023. Qantas will also ground around 100 aircraft for at least 12 months (some for longer) and plans on raising up to $1.9 in new equity with a fully underwritten $1.4 billion Placement and up to 500 million through a non-underwritten Share Purchase Plan. The immediate focus on the carrier’s plan is to rightsize the Groups workforce, restructure to deliver cost savings and efficiencies and recapitalize to strengthen the company’s liquidity position. In Thursday’s announcement, Qantas Group’s CEO, Alan Joyce said,
“The Qantas Group entered this crisis in a better position than most airlines and we have some of the best prospects for recovery, especially in the domestic market, but it will take years before international flying returns to what it was. We have to position ourselves for several years where revenue will be much lower. And that means becoming a smaller airline in the short term. Most airlines will have to restructure in order to survive, which also means they’ll come through this leaner and more competitive. For all these reasons, we have to take action now. Adapting to this new reality means some very painful decisions. The job losses we’re announcing today are confronting. So is the fact thousands more of our people on stand down will face a long interruption to their airline careers until this work returns. What makes this even harder is that right before the crisis hit, we were actively recruiting pilots, cabin crew and ground staff. We’re now facing a sudden reversal of fortune that is no one’s fault but is very hard to accept.
“This crisis has left us no choice, but we’re committed to providing those affected with as much support as we can. That includes preserving as many jobs as possible through stand downs, offering voluntary rather than compulsory redundancies where possible, and providing large severance payouts for long serving employees in particular. As we’ve done throughout this crisis, our decisions are based on the facts we have now and the road we see in front of us. Our plan gives us flexibility under a range of scenarios, including a faster rebound or slower recovery. Despite the hard choices we’re making today, we’re fundamentally optimistic about the future. Almost two-thirds of our pre-crisis earnings came from the domestic market, which is likely to recover fastest – particularly as state borders prepare to open. We have the leading full service and low fares airlines in Australia, where distance makes air travel essential, and diversified earnings through Qantas Loyalty. We still have big ambitions for long haul international flights, which will have even more potential on the other side of this. As a business, recapitalizing means we can get ready sooner for new opportunities, returning to profit and building long term shareholder value. As the national carrier, we remain committed to supporting tourism, connecting regional communities and safely flying millions of people every year.”
Qantas plans on using the proceeds from the previously described equity offering to accelerate the Group’s recovery and strengthen their balance sheet. The Placement price for shares will be $3.65/share, a 12.9 percent discount to the last traded price of $4.19 on June 24, 2020. The Placement of around 372.7 million new fully paid shares represents a 25 percent increase to total shares on issue.
As part of the carrier’s recovery plan they will reduce their workforce by at least 6,000 employees across the business and will stand down 15,000 employees (especially those associated with international operations) until demand returns. Qantas expects that approximately 8,000 of their team members out of 29,000 will return to work by the end of July, increasing to around 15,000 by the end of 2020, and ultimately reaching 21,000 by June 2022. Additionally, Qantas will retire their six remaining Boeing 747s immediately and defer Airbus A321neo and Boeing 787-9 fleet deliveries. With the time frame for the return to service of their 12 Airbus A380s uncertain, Qantas expects to take an impairment charge of between $1.25 to $1.4 billion in their statutory FY20 financial results.
Source: Qantas