The road to recovery has some way to go, but the situation around Covid seems to be stabilizing to offer Qantas the chance to recover strongly in the next few months. Domestic capacity should be back to 90-100 percent before the summer, and international capacity to 44 percent, Qantas said on February 24 at the presentation of its HY1 results. Qantas sees some stabilization after difficult HY1.
Qantas reported a statutory loss before tax of $622 million compared to $-1.442 billion in the June-December 2020 period. This includes the $649 million in net proceeds from the Mascot land sale. The underlying EBIT was $1.129 billion versus $-863 million, the underlying EBITDA was $245 million compared to a positive $86 million, reflecting the impact of border closures and lockdowns in the first six months of FY22. As CEO Alan Joyce remarked, this has been the fourth consecutive have-year loss for Qantas, bringing total losses since March 2020 to over $6 billion and lost revenues to $22 billion.
Total revenues improved to $3.074 billion from $2.330 billion, of which $1.534 billion is from passengers and $920 million from cargo (2020: $613 million). Cargo benefitted from increasing e-commerce demand and international belly space availability, notably in the US. Joyce said that some 92 percent of all passenger flights have been cash positive during three consecutive of the six months, contributing to a $552 million net free cash flow that, again, includes the Mascot sale and contributions from cargo and the Qantas Loyalty program.
Domestic suffered from border closures
Qantas Domestic produced $1.127 billion in revenues (2020: $1.003 billion) and an underlying EBIT of $-613 million ($-329 million). Capacity was at just 42 percent of pre-Covid levels or at 65 percent in December. While demand for leisure travel was strong at the start of the period, new restrictions and state border closures delayed the recovery. Still, Qantas and Jetstar opened fifteen new routes between city pairs during the period to places that were open. The delayed reopening of Western Australia until later this year will cost Qantas some $60 million in revenues.
Qantas Link positioned five Embraer E190s to Central Australia and the Northern Territory and expects to double this to ten by April, with options on another eight E-jets that are leased in from Alliance Aviation.
Qantas International reported $1.317 billion in revenues, up from $722 million, but this includes cargo. The underlying EBIT was $-238 million ($-279 million). International benefitted from the reopening of travel for Australian nationals in November which was followed by the reinstatement of services to London, Singapore, Los Angeles, and Delhi. The return to service of the A380 was brought forward, with the first back in action in January on the Sydney-LA route.
Jetstar increased its revenues to $394 million from $384 million, but the underlying EBIT deepened to $-417 million from $-323 million. The underlying EBITDA of $-243 million versus $-98 million reflects the losses on the Australian and New Zealand international routes and that of Jetstar Asia. The low-cost subsidiary operated at just 38 percent capacity. All Airbus A320neo-family and most Boeing 787-8s are back in service again as the carrier has relaunched operations and will add seven new routes to its network.
Qantas remains on track on its recovery plan, which so far has brought $840 million in cost reductions and is on track for the $1.0 billion target for FY23. The plan includes the reduction of its workforce by some 9.800 since 2020. The airline continues to repair its balance sheet and reduce debt, which was reduced by $0.4 billion to $5.5 billion in HY1, while also investing in new customer products. Liquidity stood at $4.3 billion by the end of December. Qantas continues to explore incremental benefits and will look for offsetting non-fuel costs until FY24.
By December, all Australian-based staff had returned to work. Qantas is offering all 20.000 non-executive staff members the option to buy 1.000 shares each, which will be converted into shares in August. The reward is worth $5.000 per employee at current share values. Joyce said that “this is part of a retention and reward program to say thank you. Thank you for sticking with us. And thank you for all your work towards getting the national carrier back on its feet.”
Qantas will present its climate action plan in March
In March, Qantas will present its sustainability and climate action plan on how it will get to net-zero emissions, which will include its interim targets for 2030 and plans to increase the uptake of sustainable aviation fuels. Part of the plan is the renewal of the fleet. As it said in December, Qantas expects to finalize its Project Winton order for twenty Airbus A220-300s and twenty A321XLRs plus 94 purchase rights before the middle of the year.
Deliveries of nine A321neo’s and three Boeing 787-9s have been deferred in FY20 until FY23 to FY23, resulting in an increase of capital expenditures next year to some $2.4 billion. Ten A380s will be re-activated, of which five until this summer, while Jetstar Australia will get five A320s from Jetstar Asia and two from Jetstar Japan. Jetstar International will get a 787-8 from its Australian subsidiary and some A320s from New Zealand. As reported, the Qantas full-freighter fleet will get two converted A330-200s in 2023, which are added to the three A321P2Fs that have been delivered since October 2020.
Finally, subject to Board approval, Qantas will restart its activities for Project Sunrise and the purchase of twelve A350-1000s that it plans to operate non-stop on routes to Europe and the US. The current plan is to launch services in 2025.
Qantas Domestic expects to return to 68 percent capacity in the current third quarter and to 90-100 percent in Q4 (April-June), with Jetstar back to 75 percent in Q3 and full capacity in Q4. Qantas International should operate at 22 percent in Q3 and 44 percent in Q4. The carrier expects the overall effect of Omicron restrictions to impact Group EBIT by some $650 million in HY2.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.