QANTAS: Recovery, loss, and redundancies

The share market is a funny thing. After delivering this rather bad news, of a statutory AU$2 billion loss, Qantas shares went up over 3%. Maybe the market values honesty, or redundancies?

“Firstly, most of our people are now back at work. That’s all of our domestic crew, all of our corporate employees and a small number of our international crew. Of course, we want more back – but it’s a huge improvement on where we’ve been.

“Secondly, the business is now generating enough cash to start paying back some of the debt we took on to get through COVID. That’s a really significant milestone that shows we’re on a sustainable footing.

“But today’s figures also show the ongoing financial damage of COVID. We expect to post a statutory loss (before tax) of more than $2 billion in FY21. That’s on top of a $2.7 billion loss last year.”Alan Joyce, Qantas CEO

Wage Freeze

Well, this is no surprise, with unemployment endemic in the airline industry, its not like any workers have bargaining power. Qantas is imposing a 2-year employee wage freeze, including for management. It’s done this before, and then provided bonuses when finances improve.

Travel Agent commissions down

Again not surprising given that travel agents are on life support, especially if they specialise in international travel. Qantas is giving agents time to adjust, as this will not come into effect until mid-2022.

Redundancies

Well this had to come, I suppose, unfortunately. Qantas International cabin crew will be offered voluntary redundancies. That could change the age composition of crew, if those close to retirement take up the limited offer.

Domestic flying

Well this is going gangbusters!

“Qantas and Jetstar are on track to reach a combined 95 per cent of pre-COVID domestic capacity for the quarter ending in June, and well over 100 per cent next financial year.”

Loyalty

Apparently, we are redeeming flights with points at levels that outstrip pre-COVID – up 85% over November levels last year. Mind you, given the various lockdowns around that time last year, that shouldn’t be a surprise.

Trans Tasman – the only form of international flying

Qantas is doing about 60% of pre-COVID traffic, which is pretty good. Apparently keeping their international assets was costing Qantas AU$5 million a week, and that’s now down to AU$3 million. You can’t leave those A380’s in the desert for nothing!

Repatriation Flights

Joyce ended by indicating that Qantas would be operating more government-backed repatriation flights over the coming months, and then he praised his staff:

“Can I say how proud and grateful we are to the crew who put their hands up to operate these services, and the team of people behind them who work so hard to make sure this process is a safe one for our people, passengers and the community more broadly.”

2PAXfly Takeout

The aviation industry has a difficult road ahead when it comes to sustainability. It’s going to require a relative revolution in technology, with ‘electric planes’ or hydrogen planes, or some form of jet engine that doesn’t require a carbon based fuel. And that is going to require the development of an alternative to jet engines probably.

It’s a big ask. It will take time to develop.

This move to home grown and manufactured SAF is a first step – maybe even a baby step in a very long road of innovation. In the long run, US$200 million won’t even touch the sides.

Tough times.