Qantas swings to $2b loss as revenue hit by first few months of coronavirus pandemic
Qantas has recorded a $2 billion loss, with the coronavirus pandemic slashing its full-year revenue by 21 per cent.
The airline recorded a net loss of $1.96 billion, down more than $2.8 billion from last year’s $840 million profit.
Qantas said the result was dragged lower by a $1.4 billion write-down in the value of assets, such as its Airbus A380 aircraft fleet, and $642 million in one-off costs associated with its pandemic restructuring program, such as redundancy payments to staff.
The airline expects to finalise around 4,000 of its 6,000 planned job cuts by the end of September, while it continues to stand down 20,000 employees.
Underlying profit, excluding those big one-off costs, was $124 million, down 91 per cent from $1.33 billion the year before.
Qantas warns of ongoing profit hit
Qantas chief executive Alan Joyce said just the first few months of the pandemic, to June 30, caused a $4 billion slump in revenue and a $3 billion-plus turnaround in the airline’s fortunes.
“We were on track for another profit above $1 billion when this crisis struck,” he said.
“COVID will continue to have a huge impact on our business and we’re expecting a significant underlying loss in FY [financial year] 21.”
Mr Joyce said the continued halt to international travel alone guaranteed another big loss in the current financial year.
“International [flights] typically would generate $8 billion of revenue,” he said.
“We’ve said that we had $4 billion in revenue as the COVID hit last year, there’s a minimum of an $8 billion revenue hit to us this year without international, and we have assets that will be depreciated, an $800 million depreciation cost, that we have no revenue coming in to cover.”
Workers bear brunt of COVID, airports plead for help
So far, however, Qantas said it had been able to cover most of its revenue decline with reduced costs.
An 82 per cent slump in revenue from April to the end of June has been countered by a 75 per cent reduction in cash costs.
The airline retired its remaining Boeing 747 jumbo jets six months early, and currently has more than 100 aircraft in storage, including its Airbus A380 super jumbos, which are not scheduled to come back into service for three years.
Most of this cost reduction has come from standing down the bulk of the airline’s workforce, as well as fuel savings.
A survey by the Transport Workers Union (TWU) in May found 70 per cent of aviation workers had been stood down from their jobs, with 40 per cent saying they had no income and almost 30 per cent accessing their super to make ends meet.
Qantas said it had claimed $267 million in JobKeeper payments, with the majority used to pay stood-down staff.
In total, to June 30, the airline received more than half a billion dollars in Federal Government assistance, although most of it was used to keep operating unprofitable services, with the airline reporting a net $15 million benefit.
Mr Joyce welcomed the extension of JobKeeper to March, albeit at a reduced rate, saying it had been a “lifeline” for Qantas and the aviation sector.
The Qantas boss said he was in continuing discussions with the Federal Government over the extension of specific aviation support measures, such as subsidised flights to maintain a “minimum viable domestic network”.
TWU national secretary Michael Kaine said further support was imperative for the industry and its workers.
“It must surely be only a matter of time before Qantas follows Virgin in requesting help from the Federal Government to stay alive,” he said.
“Our airports are also in danger of collapsing and are pleading for assistance on a daily basis.
“The Federal Government needs to meet aviation businesses, airports and workers right now to work out a plan of action to stop aviation hitting a wall.”
Qantas chief financial officer Vanessa Hudson and Mr Joyce both told the ABC’s Andrew Robertson that the airline’s available funding and dramatic cost cutting meant it could continue operating under current conditions.
“That gives us the longest runway of any airline group out there, well through 21 and into ’22, and we may need that, because we could see a while before a vaccine comes out,” Mr Joyce said.
Qantas is not paying dividends in order to preserve its cash during the COVID-19 crisis.
Travel demand remains high: Joyce
However, Mr Joyce said he remained optimistic about the longer-term prospects for the airline as the pandemic subsides.
“Recovery will take time and it will be choppy. We’ve already had setbacks with borders opening and then closing again,” he said.
“But we know that travel is at the top of people’s wish lists, and that demand will return as soon as restrictions lift.”
Qantas has around 20 per cent of its pre-pandemic domestic capacity scheduled for August, despite continued state border restrictions.
It also expects its domestic market share to rise from 60 per cent to up to 70 per cent, due to Virgin Australia’s financial woes and the closure of its discount carrier Tiger Australia.
The airline said that “recent sales activity shows high levels of latent travel demand when restrictions are eased”.
However, the airline reiterated its view, first expressed in June, that international flights would probably not resume before July 2021, with the possible exception of flights to New Zealand.
Mr Joyce said he fully understood and supported the Victorian border closures because of the clear health threat posed to the rest of the nation.
However, he expressed frustration with some other state border closures, which he said appeared to be politically motivated.
The Qantas boss called for National Cabinet to agree to a set of clear border closure principles based on medical advice, so that businesses and the public would be able to better predict what could happen with travel restrictions.