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Qantas Reports FY 2020 Pre-Tax Statutory Loss of $2.7 Billion, Underlying Pre-Tax Profit of $124 M

Qantas reported on Thursday their fiscal year 2020 financial results for the 12 months ending June 30, 2020. The carrier reported a 91 percent decline in underlying pre-tax profit to $124 million and a statutory pre-tax loss of $2.7 billion.

Qantas 787-9 Dreamliner in Centenary Livery - Courtesy Qantas

Today (August 20, 2020), the Qantas Group reported their FY20 financial results for the 12 months ending June 30, 2020. The Group’s underlying pre-tax profit declined 91% to $124 million, while their pre-tax statutory loss totaled $2.7 billion, including a $1.4 billion non-cash write down of assets, including their A380 fleet, as well as $642 million in one-off redundancy and restructuring costs. Qantas reported a strong first half of the year with an underlying pre-tax profit of $771 million, followed by an abysmal second half (2H20) drop in revenue of $4 billion due to the global COVID-19 pandemic and related border closures. Between April and the end of June, Group revenue fell 82 percent, while costs were reduced by 75%, thereby limiting the drop in underlying pre-tax profit during the second half to $1.2 billion. In Thursday’s announcement, Qantas Group’s CEO, Alan Joyce said,

“The impact of COVID on all airlines is clear. 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. We’ve had to make very tough decisions in the past few months to guarantee out 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. That means we can get more of our people back to work.

“COVID is reshaping the competitive landscape and that presents a mix of challenges and opportunities for us. Most airlines will come through this crisis a lot leaner, which means we have to reinvent how we run parts of our business in a changed market. We were on track for another profit of above $1 billion when the crisis struck. The fact that we still delivered a full year underlying profit shows how quickly we adjusted when revenue collapsed. Qantas Loyalty’s profit was down less than 10 percent 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 resource companies is strong. COVID-19 will continue to have a huge impact on our business and we’re expecting a significant underlying loss in FY21. Looking further ahead, we’re in a good position to ride out this storm and make the most of the recovery. 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.”

Group Domestic during the first half performed strongly, offsetting the 50% drop in second half revenue caused by COVID-19 restrictions, with Qantas domestic achieving an EBIT of $173 million and Jetstar Domestic an EBIT of $112 million, absorbing a $33 million impact of a peak summer period industrial action. The company expects to increase their domestic market share from 60 to 70% due to the fleet reduction at Virgin Australia and closing of the airline's low-cost carrier.

Qantas International earned an FY20 profit of $56 million, largely attributable to a record performance by Qantas Freight and a large increase in e-commerce. Regularly scheduled international flights ceased in April and were replaced by over 100 repatriation services operated by Qantas on behalf of the Australian Federal Government. Jetstar’s international businesses made losses due to border closures and while New Zealand domestic flying was planning a return to nearly full capacity by the end of August, uncertainty remains, given changing restrictions. Jetstar Asia in Singapore is reducing their fleet and workforce by over 25% and while Jetstar Japan was impacted by local lockdowns, they resumed domestic routes in July, and are planning to operate at around 75% of pre-pandemic capacity in August. Additionally, The Group announced in June a divestment of its 30 percent stake in Jetstar Pacific in Vietnam.

As of June 30, 2020, Qantas had received a total gross benefit of Government support of $515 million and a net benefit of $15 million after costs for flights operated. The Group also collected $267 million in ‘Jobkeeper’ benefits which was paid to employees on stand down and used to subsidize wages of those still working. As previously mentioned, the Group’s available liquidity at the end of June was $4.5 billion, including $1 billion in undrawn credit facilities. The company also successfully raised over $1.4 billion through a fully underwritten institutional placement and retail Share Purchase Plan. At the close of FY20, the Qantas Group had a net debt of $4.7 billion with no major debt maturities due until June 2021. The company also reduced second half CAPEX by 400 million and expects further reductions in FY21 with the deferral of Boeing 787-9 and Airbus A321neo deliveries.

Source: Qantas Group

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