Qantas Group Publishes Market Update With Focus on Repair and Recovery
For December, the Group has reached 68 percent of pre-pandemic capacity, rising to nearly 80 percent for the third quarter. The company maintains a strong liquidity position of $3.6 billion and will begin to repair their balance sheet during the second half of FY21.
Today (December 3, 2020), the Qantas Group published a market update as the carrier focuses on recovery and repair form the COVID-19 related industry downturn, The company maintains a strong liquidity position of $3.6 billion and will begin the process of fortifying their balance sheet during the second half of FY21. Qantas remains on track to achieve approximately $1 billion in annual savings from 2023 due to their comprehensive restructuring and recovery plan.
As of November 30, 2020, the company’s $3.6 billion in liquidity was comprised of $2.6 billion in cash and an undrawn $1.0 billion revolving credit facility, which is expected to be increased to $1.5 billion by the end of the year. Qantas has no further material debts maturing until April 2022, though the company’s net debt rose from $4.7 billion to June 30th to $5.9 billion on November 30, 2020. The company is one of the few global airlines that has maintained an investment-grade balance sheet throughout the pandemic. In Thursday’s announcement, Qantas Group’s CEO, Alan Joyce, said,
“We’ve seen a vast improvement in trading conditions over the past month as many more people are finally able to travel domestically again. There’s been a rush of bookings as each border restriction lifted, showing that there’s plenty of latent travel demand across both leisure and business sectors. Between Qantas and Jetstar, there were over 200,000 fares sold for flights to Queensland in 72 hours after the border openings with Sydney and Victoria were announced. We’re also seeing people booking several months in advance, which reflects more confidence than we’ve seen for some time.
“Bringing domestic capacity back to almost 70 per cent in December is very positive compared to where we’ve been, and so is seeing more of our people back at work. But overall, the Group is still a long way off anything approaching normal. It’s unclear what shape the domestic economy will be in next year, particularly once broader government support winds back. Until a vaccine is rolled out, the risk of more outbreaks remains.
“International travel is likely to be at a virtual standstill until at least July next year and it will take years to fully recover, which means we’re carrying the overhead for billions of dollars’ worth of aircraft in the meantime. We’re also facing a revenue drop of at least $11 billion this financial year alone compared to pre-COVID. Overall, we’re optimistic about the recovery but we’re also cautious given the various unknowns. We also have a lot of repair work to do on our balance sheet from the extra debt we’ve taken on to get through the past nine months. That’s why we remain focused on delivering on our recovery program, which unfortunately involves following through on some hard decisions to restructure and respond to the new set of circumstances we’re faced with.”
With the recent increase in domestic demand, Qantas has increased the number of full tile equivalent (FTE) roles from 9,000 in October to 11,500 in December. The company plans on increasing the number of FTE’s to around 14,000 during the fiscal third quarter, though approximately 13,500 roles remain stood down. International operations remain largely grounded except for ongoing repatriation services and a limited number of flights to New Zealand under a one-way bubble arrangement.
Qantas freight continues to perform exceptionally well both domestically and internationally and additional flights have been added between Los Angeles, Sydney and Hong Kong, with several passenger aircraft operating as freighters. Qantas freight is also currently working on logistics for the transportation of the COVID-19 vaccine at cold temperatures.