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Qantas, Air New Zealand Report Historic Losses
The two largest Oceanic carriers, Qantas Airways and Air New Zealand, have reported their dreary earnings for the full year of 2020. Large declines in passenger volume, mainly attributed to ongoing travel restrictions driven by the COVID-19 pandemic, have caused both airlines to incur losses.
Record Losses For Qantas
Qantas Airways posted a record pretax loss of 1.03 billion Australian dollars ($824 million) in 2020, compared to an AUD$771 million profit in 2019. Meanwhile, the airline’s revenue fell 75.4 percent, to AUD$2.33 billion.
“During the half we saw the second wave in Victoria and the strictest domestic travel restrictions since the pandemic began. Virtually all of our international flying and 70 percent of domestic flying stopped, and with it went three-quarters of our revenue,” states Alan Joyce, CEO of Qantas.
Domestically, Qantas saw domestic EBIT losses of AUD$407 million, driven by domestic travel restrictions. Internationally, the Australian carrier incurred AUD$549 million in EBIT losses.
Mr. Joyce adds, “These figures are stark, but not surprising.”
Qantas Freight, its cargo subdivision, has provided some relief in offsetting the airline’s losses. The freight side of the business recorded historic profits for the year, driven by increased e-commerce demand and a lack of passenger flights that freed up space for service cargo demand. Furthermore, Qantas projects that its domestic flying will rebound, with 60 percent of its capacity in the third quarter and 80 percent of its capacity in the fourth quarter.
Based on COVID-19 vaccine rollout projections, the Sydney-based carrier announced the postponement of its international restart from July 2021 to late October 2021. However, Qantas Airways will restart 22 out of its 25 international routes, including flights to key stations like Johannesburg, Los Angeles, London and Singapore. Qantas will leave New York, Osaka, and Santiago out of its initial plans, but intends to resume these routes in the future.
Trans-Tasman flights – flights between New Zealand and Australia – will resume in July 2021, due to the impending travel bubble between the two countries. The airline notes that frequencies will be adjusted with lower capacity than pre-COVID-19 levels, anticipating a full rebound by 2024.
Qantas’ low-cost subsidiary, Jetstar Airways, will resume all thirteen of its international flights by the end of October, with lower capacity, as well.
To help with international travel, Qantas is evaluating several options for digital pass health apps like IATA TravelPass or the CommonPass via its international repatriation flights. Similarly, its codeshare partner, Air New Zealand, will trial the IATA TravelPass in April on flights between Auckland and Sydney.
Losses for Air New Zealand
In contrast to Qantas, Air New Zealand posted only modest annual earnings losses – before key items and taxation- of 183 million New Zealand dollars ($137.2 million) in 2020, its first loss in 18 years. In 2019, the airline recorded a profit of NZ$387 million. Revenue dropped 59.1 percent to NZ$1.234 billion.
Additionally, the New Zealand airline estimates that it will continue to face a monthly cash burn of NZ$45 million to NZ$55 million in the first half of 2021, down from an average of NZ$79 million in cash burn in the last half of 2020. Furthermore, its short-term liquidity totaled NZ$700 million, including NZ$550 million in undrawn funds from the New Zealand government and NZ$170 million in cash.
However, the Auckland-based carrier touts itself as “positioned for success.” Its domestic capacity comprises up to 76 percent of pre-COVID-19 levels because of an increase in domestic tourism and business demand. Also, Air New Zealand’s cargo revenue was up 91 percent in 2020, one of the bright spots for the airline.
Greg Foran, CEO of Air New Zealand, states, “Although it is clear that COVID-19 will continue to impact the aviation industry for some time to come, we are thrilled to see such strong results from our domestic and cargo businesses. We are one of the few airlines globally that has seen this level of passenger recovery and we know that is driven by our core strength on the domestic market.”
“The airline’s cargo operations, supported by the IAFC scheme, have also played a vital role in driving New Zealand’s economic recovery, delivering vital medical supplies and PPE and transporting our precious export products around New Zealand and the world. As a result of these operations, cargo revenue has increased 91 percent to $373 million for the six-month period,” Mr. Foran adds.
With its bright outlook, Air New Zealand plans to strengthen its domestic and cargo businesses, ahead of border reopenings. The Auckland-based airline also plans to recapitalize its balance sheet by the end of June. Amid the optimistic tone, the carrier provides no earnings guidance for 2021 but anticipates a significant loss.
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