Despite more red ink forecast for Qantas the shares rose 3.6% yesterday to $4.68 as investors liked the news of an upsurge in domestic travel, peaking debt, more job cuts and a two year wage freeze.
News of the airline facing another multi-billion loss for the year to June didn’t worry the market.
Qantas said in a trading update that it was looking at a loss of more than $2 billion before tax for the year to June.
That will take losses for the years 2019 to 2021 to around $4.7 billion.
But the airline told the ASX that it has stopped burning cash (using more money than it is getting in) and expects to be back to 95% of pre-Covid domestic capacity in the current June quarter.
But it has pushed back its restart of international flights to the end of the year from the previous date of October, even though the recent federal budget suggested – strongly – that there would be no re-opening until the middle of 2022.
Qantas thinks the re-opening will come quicker once most of the population have been vaccinated.
“No one wants to lose the tremendous success we’ve had at managing COVID but rolling out the vaccine totally changes the equation,” Qantas CEO Alan Joyce said.
“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,” he said.
Qantas said it expects an underlying earnings before interest, tax, depreciation and amortisation of $400 to $450 million – which is not a real measure of profitability in this case because interest and depreciation are major charges for Qantas regardless of whether it is making a profit or not.
“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,” the airline told the ASX on Thursday.
“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 redundancy offer is for long-haul international cabin crew and does not apply to pilots.
And Qantas snuck in another radical change in Thursday’s announcement. The group will pay travel agents less sales commission for overseas bookings.
The fee will drop from 5% to 1% and take effect mid-next year.
That’s bad news for the travel centre businesses such as Flight Centre, Webjet, Corporate Travel and Helloworld. In fact it makes then even more of a sell if their biggest source of revenue has slashed a key source of revenue by 80%.
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And it’s just not Qantas that is mired in red ink.
Like Qantas, rival Singapore Airlines has just revealed a second annual loss.
But unlike Qantas, Singapore’s inkpot is very deep – $S4.27 billion ($US3.20 billion, $A4.1 billion).
The loss for the year to March 30 also much larger than the $S212 million annual loss in the 2019-20, its first ever loss, when only one quarter (the final, three months to March 31) was affected by the pandemic.
Included in the latest loss is $S2 billion of impairments largely on the 45 older planes surplus to requirements – many of them A380’s.
As a result Singapore said it is going to issue $S6.2 billion of convertible bonds to help finance its continued existence during the crisis.
Annual revenue slumped 76.1% to $S3.82 billion in the year to March 31 and strong cargo revenues were not enough to offset the revenue loss from an almost 98% fall in passenger numbers.
The airline said it expected passenger capacity to rise to 28% of pre-pandemic levels by June, but much of that is due to strong freight demand sustaining the number of flights.
It filled just 13.4% of passenger seats in the financial year ended March 31 (Singapore like its rival Cathay does not have a domestic market that is helping Qantas and Air NZ survive).
“This crisis is not over,” Singapore Airlines Chairman Peter Seah said in a statement.
“While the growing pace of vaccinations has given us hope, new waves of infections around the world mean that restrictions on international travel largely remain in place.”
Like Qantas, Virgin and other carriers around the world, Singapore Airlines has cut jobs, deferred aircraft deliveries and raised equity and debt financing to help it survive.
Singapore said it the S$6.2 billion of mandatory convertible bonds it was issuing are an optional part of a $S15 billion rescue package led by its majority shareholder, Government invest giant, Temasek Holdings last year.
