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Qantas Forecasts Declining Financial Year, Additional Measures for Recovery
Qantas made an announcement on Thursday, May 20, suggesting that the airline is forecasting to lose at least A$2 billion ($1.54 billion) this financial year and also foresees its total revenue dropping to a big loss at A$16 billion (US$12.4 billion), despite the gradual increase in domestic air travel.
The forecasted losses will come as Qantas, as well as other international airlines, try to stay afloat during the current Covid-19 pandemic that has halted almost all international air travel, grounding countless aircraft and causing many aviation personnel to lose their jobs.
Australia’s flag carrier also said that it might have to retrench some “hundreds” of cabin crew in addition to the thousands of employees it had already let go, but added that more than half of its pre-Covid 22,000-strong workforce – all of whom are mostly domestic crew, corporate employees and a small number of the international crew – were back at work.
The airline has also reported having generated enough cash to start repaying some debt that it took on earlier during the pandemic to survive, which the airline has cited as “a really significant milestone that shows we’re on a more sustainable footing”.
“Assuming no further lockdowns or significant domestic travel restrictions, the group expects to be underlying EBITDA positive in the range of A$400-450 million for FY21,” the airline said. “At a statutory level before tax, the group is still expecting a loss in excess of A$2 billion, which includes the significant costs associated with previously announced redundancies, aircraft write-downs and non-cash depreciation charges.”
Qantas Freight has also continued to serve as a natural hedge for the downturn in international passenger travel and the cargo capacity that it normally brings, and it is expected to exceed the revenue it achieved in the first half of the financial year.
Additionally, the Trans-Tasman travel bubble has also been recovering steadily, although there have been several pauses and additional restrictions from both countries in response to small outbreaks. These have also impacted passenger confidence for a while, which lead to capacity being limited to around 60 percent of pre-Covid levels.
This is expected to gradually normalize as the net cash cost of carrying the international division has improved with the two-way Trans-Tasman travel bubble and strong performance from freight, dropping from A$5 million (US$3.9 million) per week to around $3 million (US$2.3 million).
Domestic Travel is Helping Qantas in Turning The Corner
With a global air-travel rebound still in the beginning and uncertain stages, airlines with extensive domestic networks, such as American Airlines Group Inc., Delta Air Lines Inc. in the U.S. and Qantas, are faring best. Qantas, alongside its low-cost unit Jetstar, have added 38 new routes since July last year.
Qantas said passenger confidence in domestic travel is proving more resilient compared with earlier in the pandemic, despite the temporary tightening of some border restrictions.
Revenue from corporate routes within Australia—which has almost completely suppressed pre-Covid levels at its current 75 percent —is expected to almost double in the half-year ending June 30 from the previous six months.
Leisure demand is also growing consistently at a fast pace with deferred international holidays having been converted to numerous domestic holiday trips.
Qantas is on track to reach at least 95 percent of its pre-Covid domestic capacity in the final quarter of this financial year, and is expected to average around 107 percent in the next financial year.
To meet the expected increasing domestic demand, Qantas and Jetstar have brought forth all domestic aircraft into service. QantasLink has further brought eight of its fourteen Embraer E190 aircraft into service, as part of its deal with Alliance Airlines.
Jetstar will also reactivate up to five Boeing 787-8s for domestic operations, as well as six Airbus A320s on loan from Jetstar Japan, as it is forecasted to average approximately 120 percent of its pre-Covid domestic capacity in the next financial year.
Currently, all of Qantas’ Boeing 787-9s and about half of its Airbus A330 aircraft having been resumed as active in service, flying a mix of freight, repatriation and regular passenger services.
“We have a long way still to go in this recovery, but it does feel like we’re slowly starting to turn the corner,” Chief Executive Officer Alan Joyce said in the statement.
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