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Qantas Reports Second Highest Loss In Company’s History
Sydney-based Qantas announced its consolidated fiscal year results marking the depth of the crisis caused by the ongoing COVID-19 pandemic. Australia’s flag carrier posted a statutory loss of 2.7 billion Australian dollars ($1.9 billion) for the fiscal year ended June 30, which is the second-highest loss in Qantas’s century-long history.
In 2014, the airline had posted a loss of 2.8 billion Australian dollars as an inevitable result of capacity growing far ahead of demand and record-high fuel costs of 4.5 billion dollars. Back then, Qantas had continuously increased its capacity for two years to compete with its rival Virgin Australia, which is currently being restructured, but saw demand fall off a cliff in the wake of the global financial crisis.
“Now Qantas posted a net loss of 1.96 billion Australian dollars for the financial year, but this loss only occurred in the second half of the pandemic,” Qantas Group CEO Alan Joyce said in a statement.
“It’s been shaped by extraordinary events that have made for the worst trading conditions in our 100-year history. To put it simply, we’re an airline that can’t really fly to many places – at least for now. The impact of that is clear. COVID punched a 4 billion dollar hole in our revenue and a 1.2 billion dollar hole in our underlying profit in what would have otherwise been another very strong result. We flagged in June a 2.7 billion dollar statutory loss for the year.”
The airline’s steep loss was mainly driven by the grounding of its A380 fleet, which will remain at storage in California’s Mojave Desert for an indeterminate amount of time. Layoffs costing 600 million dollars followed the write-down of the A380 fleet as the cause of the financial loss. Qantas reduced its workforce by 6,000 employees as part of a restructuring plan.
The Australian carrier, however, posted an underlying profit before tax of 124 million dollars, representing strong performance in key business domains which was overshadowed by the writedowns and other costs. That came despite the bitter fruits of COVID-19, giving the airline confidence for the future. According to Mr. Joyce, the profit the airline made in the first half of the year prior to the pandemic and immediate action they took to reduce costs as soon as travel demand collapsed were driving forces for the profit.
In June, Qantas secured an injection of 1.9 billion Australian dollars from investors trusting the comeback of air travel. The Australian government also paid approximately 250 million dollars in subsidies for jobs and another 250 million dollars came from other financial aid programs. Thus, the injections and aids can be viewed as the other driving forces for the underlying profit as they have given the airline a total financial cushion of 4.5 billion Australian dollars.
“I also want to acknowledge the federal government’s support. They were very quick to recognise the impact of travel restrictions on aviation – and responded with industry-wide support, plus JobKeeper, which has been a lifeline for our employees. Obviously, this result would have been very different without border closures – but they have been an important part of the public health response and we greatly appreciate the government’s support. The industry will need that support while the closures remain in place,” Joyce said in a statement.
Progress On Recovery Plan
Qantas announced its recovery plan at the end of June. The airline believes with the plan it will save $15 billion over the coming three years.
The plan covers mass layoffs, furloughs, fuel savings and lower maintenance costs as most of the airline’s fleet is in hibernation. All of Qantas Airbus A380s are in long term storage in the desert in the U.S. and all Boeing 747s have been retired, six months ahead of schedule. Four thousand of the planned 6,000 layoffs will be completed by the end of September, and the stand-down of approximately 25,000 Qantas employees is continuing because of less flying. The airline’s recovery plan, which mostly impacts the employees and the fleet, is continuing as previously slated.
“Hard decisions in the current climate are largely about survival – and also about eventually being able to grow again. Coming out of this crisis, we’ll be the only Australian airline that can fly long haul,” Joyce said.
In the absence of international operations, Qantas and its subsidiaries QantasLink and Jetstar have been forced to focus on domestic destinations. The Australian carriers have restructured their fleet for intercontinental operations. However, Qantas is optimistic for the future and is looking to come back stronger in the post-pandemic period.
“Our message is simply this: The Flying Kangaroo’s wings are clipped for now, but it’s still got plenty of ambition,” Joyce said.
The international aviation industry will have to wait to see the “Flying Kangaroo” in July 2021 at the earliest as Australia’s leading airline is slated to operate only domestic flights except for flights to New Zealand until the second quarter of next year. Qantas suspended international flight in April when the Australian government closed its borders to curb the spread of novel coronavirus pandemic.
Prior to the pandemic, Qantas was operating long-haul flights to 14 countries and planning to operate nonstop flights between Sydney and London.
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