QANTAS GROUP MARKET UPDATE – BALANCE SHEET REPAIR UNDERWAY

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    • Sustained domestic recovery driving strong cash generation.
    • Statutory free cash flow positive for 2H21; Jetstar Underlying EBIT positive in April.
    • Underlying EBITDA of $400-450 million expected in FY21.
    • Strong total liquidity position of $4.0 billion1
    .
    • Net debt has peaked and starting to decline.
    • Forecast statutory loss before tax of more than $2 billion in FY21.
    • Qantas Loyalty returning to earnings growth in 2H21.
    • Revised assumption for phased return of material international flying from late December 2021 onwards.
    • Recovery program on track to deliver $600 million ongoing cost reduction in FY21.
    Sydney, 20 May 2021: A sustained rebound in domestic travel demand, and the performance of its Freight
    and Loyalty divisions, continues to drive the Qantas Group’s recovery from the impacts of COVID-19.
    Based on current trading conditions the Group expects to be statutory free cash flow positive for the second
    half of FY21. Net debt levels peaked in February at $6.4 billion and are expected to be lower than they were
    in December ($6.05 billion) by the end of the financial year.
    Liquidity levels remain strong with total funds of $4.0 billion, including cash of $2.4 billion and $1.6 billion of
    undrawn debt facilities as at 30 April 2021.
    The total revenue loss for the Group since the start of COVID2
    is now projected to reach $16 billion by the end of
    FY21 – however the role of domestic travel demand in the Group’s recovery is highlighted by the fact revenue
    from domestic flying is expected to almost double between the first and second half of this financial year.
    Assuming no further lockdowns or significant domestic travel restrictions, the Group expects to be Underlying
    EBITDA positive in the range of $400 – 450 million for FY21. At a statutory level before tax, the Group is still
    expecting a loss in excess of $2 billion, which includes the significant costs associated with previously
    announced redundancies, aircraft write downs and non-cash depreciation charges.
    GROUP DOMESTIC
    Consumer confidence in domestic travel is proving more resilient compared with earlier in the pandemic,
    despite the temporary tightening of some border restrictions.
    A three-day lockdown in Perth during April cost the Group an estimated $15 million in EBITDA. This follows
    the $29 million impact from the Brisbane lockdown in late March and the Sydney (Northern Beaches)
    outbreak that resulted in an impact of around $400 million in EBITDA for the period.
    1 As at 30 April 2021
    2 FY19 is used as a proxy for pre-COVID performance
    2
    Qantas Airways Limited ABN 16 009 661 901
    Further information and media releases can be found at the Qantas website: qantasnewsroom.com.au
    Corporate travel, including the small business segment, continues to recover and is now at 75 per cent of
    pre-COVID levels3
    (up from 65 per cent in April). Leisure demand is growing strongly, with deferred
    international holidays converting into multiple domestic trips.
    The Group is on track to reach 95 per cent of its pre-COVID domestic capacity for the fourth quarter of FY21.
    Qantas and Jetstar expect to average 107 and 120 per cent respectively of their pre-COVID domestic
    capacity in FY22.
    To meet this demand, Qantas and Jetstar have now brought all domestic aircraft back into service. In
    addition, QantasLink has activated eight (of up to 14) Embraer E190 aircraft as part of its deal with Alliance
    Airlines. Jetstar is reactivating up to five Boeing 787-8s for domestic use as well as six A320s on loan from
    Jetstar Japan.
    With the increase in domestic leisure travel demand, Qantas and Jetstar have now announced a total of 38
    new routes since July last year.
    GROUP INTERNATIONAL AND FREIGHT
    Travel demand between Australia and New Zealand is rebuilding steadily. Several pauses and additional
    restrictions from both countries in response to small outbreaks have impacted confidence, leading to capacity
    being limited to around 60 per cent of pre-COVID levels. This is expected to gradually normalise, following a
    similar pattern as key domestic routes.
    All of Qantas’ Boeing 787-9s and about half of its A330 aircraft are active, flying a mix of freight, repatriation
    and regular passenger services.
    Qantas Freight continues to serve as a natural hedge for the downturn in international passenger travel and the
    cargo capacity that it normally brings. Freight is expected to exceed the revenue it achieved in the first half of
    FY21.
    The Group has revised its expectations for the return of a significant level of international flying from endOctober 2021 to late December 2021 (except Trans Tasman). This is in line with the Australian
    Government’s revised timeline for effective completion of the national COVID-19 vaccination program, and
    the Qantas Group is optimistic that the opportunities for additional travel bubbles with other countries will
    increase significantly from that point. We will continue to liaise with the Australian Government and adjust our
    planning assumptions as necessary.
    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 $5 million per week to around $3 million.
    QANTAS LOYALTY
    The Loyalty division continues to perform well, with strong revenue from partners and high engagement from
    members. It has returned to growth, with second half earnings expected to be higher than the first half of
    FY21 and the prior corresponding period in FY20.
    Redeeming Qantas Points for domestic and now Trans Tasman flights is increasing in popularity, with
    redemption levels 85 per cent higher in April 2021 compared to the same month pre-COVID.
    Status match promotions to attract more high tier members since late 2020 have now resulted in almost
    20,000 applications from Gold or Platinum equivalent flyers from other airlines.
    RECOVERY PROGRAM
    The Group’s target of at least $1 billion in annual cost reduction by FY23 is well on track, with $600 million to
    be delivered this financial year.
    3 Based on May weekly intakes.
    3
    Qantas Airways Limited ABN 16 009 661 901
    Further information and media releases can be found at the Qantas website: qantasnewsroom.com.au
    Recent developments include:
    • Ninety per cent of redundancies associated with the 8,500 job losses (already announced) are
    complete, with the remainder finalised by the end of FY21.
    • A two-year wage freeze will apply to the next round of enterprise agreements across the Group, with
    2 per cent annual increases after that compared with 3 per cent pre-COVID. Management will be
    subject to these same wage conditions.
    • As part of reducing its costs of sale, Qantas will lower front-end commissions paid to travel agents on
    international tickets from 5 per cent to 1 per cent. The change won’t take effect until July 2022, giving
    time for the industry to adapt. Travel agents remain an important partner and Qantas will work them
    on broader revenue opportunities, particularly through technology.
    • The offer of voluntary redundancy for Qantas international cabin crew. This will be run as an
    expression of interest program and is expected to generate several hundred applications, with the
    total number accepted to be balanced against retaining key capability for the longer term. This is in
    addition to job losses already announced.
    Of approximately 22,000 roles across the Group, some 16,000 are currently stood up, including all domestic
    crew, all corporate employees and some international crew.
    CEO COMMENTARY
    Qantas Group CEO Alan Joyce said:
    “We have a long way still to go in this recovery, but it does feel like we’re slowly starting to turn the corner.
    “It’s great to see so many of our people now back at work and the majority of our fleet back in the air. Our
    recovery strategy of targeting cash-positive flying rather than pre-COVID margins is helping increase activity
    levels and repair our balance sheet.
    “The fact we’re making inroads to the debt we needed to get through this crisis shows the business is now on
    a more sustainable footing. The main driver is the rebound of domestic travel, which now looks like it will be
    bigger than it was pre-COVID, at least until international borders re-open.
    “Jetstar was profitable on an underlying EBIT basis in April, which was largely due to strong leisure demand
    over Easter and school holidays, but it’s an important sign that we’re on the right path.
    “Managing costs remains a critical part of our recovery, especially given the revenue we’ve lost and the
    intensely competitive market we’re in.
    “We’ve adjusted our expectations for when international borders will start opening based on the
    government’s new timeline, but our fundamental assumption remains the same – that once the national
    vaccine rollout is effectively complete, Australia can and should open up. That’s why we have aligned the
    date for international flights restarting in earnest with a successful vaccination program.
    “No one wants to lose the tremendous success we’ve had at managing COVID but rolling out the vaccine
    totally changes the equation. The risk then flips to Australia being left behind when countries like the US and
    UK are getting back to normal.
    “Australia has to put the same intensity into the vaccine rollout as we’ve put on lockdowns and restrictions,
    because only then will we have the confidence to open up.”

    courtesy of Bell Direct
    ====================================================================================

    DYOR

    i do not hold this share ( i exited in Nov. 2014 )

  2. 79.4k
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    QANTAS AND JETSTAR ADJUST THIRD QUARTER CAPACITY SETTINGS
    13 January 2022:

    Qantas and Jetstar are adjusting flying levels to better match travel demand in light of the
    sudden growth in COVID-19 cases.
    The Qantas Group now expects domestic capacity for the third quarter of FY22 to be at around 70 per cent
    of pre-COVID levels, down from the 102 per cent that had been planned.
    The schedule changes are focused on reducing frequency of services and size of aircraft to minimise
    inconvenience for passengers as much as possible.
    The Group’s total international capacity for the same period will fall from 30 per cent to around 20 per cent
    of pre-COVID levels. This reduction is driven by increased travel restrictions in countries like Japan,
    Thailand and Indonesia and is mostly impacting Jetstar’s leisure routes. Other markets – such as London,
    Los Angeles, Vancouver, Johannesburg and India – continue to perform well.
    Customers will be contacted directly from late January if their booking is impacted by cancellations and
    offered alternative flights that in most cases are likely to be a difference of a few hours if travelling
    domestically.
    Qantas and Jetstar continue to have 100 per cent of their available Australian-based crew stood up, which
    has helped to minimise the resourcing impacts of some needing to self-isolate during the summer peak.
    This 100 per cent crewing level will be maintained despite the capacity reductions announced today, giving
    both airlines a significant buffer to manage ongoing isolation requirements and resulting in a more reliable
    schedule for passengers.
    An assessment on the financial impact of these changes will be given at the Group’s half year results in late
    February, by which time a clearer picture will have emerged on swing factors such as actual demand levels;
    potential loosening or tightening of travel restrictions in countries overseas; and consumer response to the
    reopening of Western Australia next month. No material adjustments have been made to capacity
    expectations for Q4 FY22.
    Qantas Group CEO Alan Joyce said: “The sudden uptick in COVID cases is having an obvious impact on
    consumer behaviour across various sectors, including travel, but we know it’s temporary.
    “Thankfully, Australia has one of the world’s highest vaccination rates and the Omicron variant is milder than
    its predecessors. So, as challenging as this current phase is, we’re optimistic that it is likely to fast track a
    return to normal.
    “People are already looking beyond what’s happening now with early bookings for the Easter holidays in
    April looking promising for both domestic and international.
    “We have the flexibility to add capacity back if demand improves earlier than expected, but 70 per cent still
    represents a lot of domestic flying and it’s a quantum improvement on the levels we faced only a few
    months ago.
    2
    Qantas Airways Limited ABN 16 009 661 901 Further information and media releases can be found at the Qantas website:
    qantasnewsroom.com.au
    “Our focus on cash positive flying remains, notwithstanding some of the costs that we’ll have to absorb from
    this sudden drop in demand.
    “Can I thank our people who have done an outstanding job of helping over a million Australians travel over
    the summer holidays, and to our customers for their ongoing understanding as we make our way through
    these latest challenges. This is a difficult time right across the community, but something we’ll get through,”
    added Mr Joyce.
    To give customers more confidence when they book international and domestic flights, Qantas has
    extended Fly Flex, which enables customers to change their travel dates as often as they need, fee-free (a
    fare difference may apply).
    ADVICE FOR ALL CUSTOMERS
    • Customers will be contacted directly by Qantas or their Travel Agent from late January if their
    booking has been impacted by a flight cancellation.
    • Customers are asked to please wait to hear from Qantas or their Travel Agent before taking any
    action, including cancelling their flight. This will help avoid long wait times on customer contact
    channels.
    • When Qantas cancels a flight, we rebook the passenger on the next available flight to their booked
    destination (if possible), at no additional cost. Alternatively, they can choose a flight credit or a
    refund. Customers won’t be charged any change or cancellation fees.
    • Customers should ensure their contact details are up to date in their Qantas booking or with their
    Travel agent.
    Media Enquiries: Qantas Media +61 418 210 005 qantasmedia@qantas.com.au
    Investor Relations Enquiries: +61 0416 058 178 filipkidon@qantas.com.au
    Authorised for release by the Group General Counsel and Company Secretary

    courtesy of Bell Direct
    ====================================================================================

    DYOR

    i do not hold this share ( i exited in Nov. 2014 )

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