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QANTAS sees a sustained rebound in domestic travel demand, expects to be cash positive in the second half of FY21

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QANTAS Airways has issued this financial statement:

  • 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 billion[1].
  • 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.

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 COVID[2] 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.

Corporate travel, including the small business segment, continues to recover and is now at 75 per cent of pre-COVID levels[3] (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 end-October 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.

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.”

 

[1] As at 30 April 2021

[2] FY19 is used as a proxy for pre-COVID performance

[3] Based on May weekly intakes.

Top Copyright Photo: QANTAS Airways Boeing 787-9 Dreamliner VH-ZNJ (msn 66074) (100 Centenary) LHR (SPA). Image: 948896.

QANTAS aircraft slide show:

QANTAS is set to operate a Supermoon scenic flight on May 26

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QANTAS Airways has made this announcement:

Cosmic cocktails and supermoon cakes will be on the menu when Qantas launches a one-off B787 Dreamliner supermoon scenic flight to offer a limited number of passengers a closer viewing of the upcoming supermoon later this month.

It will be the second and last supermoon for 2021 and also coincides with a full lunar eclipse, making it a rare double phenomenon, with the moon expected to turn red against the night sky.

CSIRO astronomer Dr Vanessa Moss will work with the pilots to design the optimal flight path over the Pacific Ocean and also join the flight to provide insights into supermoons and all things space and astronomy.

The flight will depart from, and return to, Sydney and is the latest in a series of special flights Qantas has operated for travelers eager to take to the skies while the industry recovers.

Chief Customer Officer Stephanie Tully said Qantas is committed to coming up with unique flying experiences, especially while travel options are limited.

“We have been absolutely overwhelmed with the popularity of our special flights. The recent mystery flights sold out within 15 minutes with hundreds of people on waiting lists and they keep telling us they want more,” Ms Tully said.

“We are very excited to now be doing a supermoon scenic flight and the 787 has the largest windows of any passenger aircraft so it’s ideal for moon gazing. We think this flight has great appeal for anyone with a passion for astronomy, science, space photography, aviation or just keen to do something a little ‘out of this world’.”

Video:

The three-hour flight will depart from Sydney and begin with a scenic flyover of Sydney Harbour before climbing above any potential cloud cover and atmosphere pollution to a cruising altitude of 43,000 feet – the maximum cruising altitude of a Dreamliner – for supermoon and full lunar eclipse viewing.

The Moon will be at its closest point or perigree, coming within 357,311 kilometres of Earth at 11:50am AEST on Wednesday 26 May. The total lunar eclipse will occur between 9:11pm and 9:25pm AEST, when the Moon is 357,462 km from Earth.

The flight will operate with net zero emissions, with 100% of emissions carbon offset.

Just over 100 seats go on sale via Qantas.com at midday Wednesday 12 May 2021 with fares starting from $499 for economy (with a Qantas Points earn of 1,500 points plus 20 Status Credits), $899 for premium economy (Qantas Points earn of 2,500 and 40 Status Credits)  and $1,499 for business (4,000 Qantas Points earn plus 80 Status Credits).

The flight will operate with Fly Well procedures in place.

Top Copyright Photo: QANTAS Airways Boeing 787-9 Dreamliner VH-ZNJ (msn 66074) (100 Centenary) PAE (Nick Dean). Image: 948008.

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QANTAS Centenary celebrations take off as nonstop London-Sydney research flight lands

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QANTAS Airways has made this announcement:

  • Project Sunrise research flight direct from London to Sydney lands after 19 hours and 19 minutes
  • Qantas announces Centenary program to celebrate 100 years of the flying kangaroo
  • Royal Australian Mint unveils commemorative $1 centenary coin
  • Qantas exhibition to visit a number of cities across Australia

Qantas has kicked off 12 months of centenary celebrations as it marks a fresh milestone in aviation with a nonstop London to Sydney flight.

Flown by the latest addition to the national carrier’s fleet, a brand new Boeing 787 Dreamliner landed in Sydney at  12:28pm, 19 hours and 19 minutes after leaving Heathrow. It follows the non-stop New York to Sydney flight last month as the second of three research flights aim at improving crew and passenger wellbeing on ultra long haul services under consideration.

The direct flight reduced total travel time by around two hours compared with current one-stop services from the east coast of Australia. It is only the second time any commercial airline has flown this route nonstop, after Qantas flew a near-empty 747-400 in 1989.

The new Dreamliner was met by more than 1,000 Qantas employees to mark the flying kangaroo’s 99th birthday and kick off 12 months of celebrations as it heads towards its centenary.

Three components of those celebrations were revealed today – special livery on a new Dreamliner that will be seen at airports around the world, featuring every Qantas logo since 1920; a $1 coin to mark the 100th that will enter circulation next year; and a touring exhibition that will visit a number of cities around Australia.

Qantas Chairman Richard Goyder said: “Qantas is a national icon because it’s been such a big part of Australian life for so long.

“We started in outback Queensland carrying mail and a few passengers in the 1920s. We grew as Australia grew, and we’ve had important support roles during wars, national disasters and celebrations. Our founders talked about overcoming the tyranny of distance and through the years we’ve moved from bi-planes, to single wing, to jets to help bring things closer,” added Mr Goyder.

Qantas Group CEO Alan Joyce said: “Almost a century after our first flight, Qantas and Jetstar carry more than 50 million people around this country and the globe each year. I’m sure that would amaze our three founders, who held the early board meetings of this company at the local tailor’s shop because it was the longest table they could find.”

“A lot of Australians saw the world for the first time on a flying kangaroo. And a lot of migrants started their life in Australia when they first stepped on a Qantas plane.

“There are so many amazing Qantas stories that also tell the story of modern Australia. We want our centenary to be a celebration of those stories as well as how we’ll be part of taking the spirit of Australia further in the years ahead,” added Mr Joyce.

Qantas will officially turn 99 years old, and begin its 100th year, on Saturday November 16, 2019.

ABOUT THE CENTENARY AIRCRAFT

The new 787 Centenary livery aircraft will fly across key Qantas international destinations, including Los Angeles, New York, San Francisco and London. Named Longreach after the Queensland town that was key to the airline’s origins, it joins nine other Qantas 787s that are all named after things that are iconically Australian, includingSkippy, Great Southern Land, Waltzing Matilda and Jillaroo.

ABOUT THE $1 CIRCULATING COIN

The Royal Australian Mint will produce approximately 5 million limited edition one-dollar coins to be used in Australia for every day cash transactions, which will go into general circulation from February 2020.

For collectors, there is an eleven-piece collection set featuring key milestones and images of aircraft from across the decades including the Avro, Catalina Flying Boat, Boeing 707 and 747 and the A380. The centrepiece is a Kangaroo copper coin similar to the original Australian penny, which inspired Qantas’ iconic Kangaroo symbol. Sets are available at www.qantasstore.com.au.

ABOUT THE DIRECT LONDON-SYDNEY FLIGHT

  • QF 7879 flight London to Sydney flight time was 19 hours and 19 minutes. Touch down at Sydney International airport was 12:28pm
  • The flight was operated by a brand-new Boeing 787-9 registration VH ZNJ, named Longreach.
  • The service was a re-purposed delivery flight. Rather than flying from Boeing’s factory in Seattle back to Australia empty, the aircraft was positioned in London to simulate one of the Project Sunrise routes under consideration by Qantas. All carbon emissions were offset.
  • The flight departed London’s Heathrow Airport and flew across 11 countries including England, Netherlands, Germany, Poland, Belarus, Russia, Kazakhstan, China, Philippines and Indonesia before crossing the Australian coast near Darwin, tracking south east across Australia towards Sydney.
  • Remaining fuel upon landing was approximately 6300kg which translates to about 1 hour 45 minutes of flight time

Top Copyright Photo (all others by QANTAS): QANTAS Airways Boeing 787-9 Dreamliner VH-ZNJ (msn 66074) (100 Centenary) PAE (Nick Dean). Image: 948008.

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QANTAS Group to slash carbon emissions

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The QANTAS Group will reach net zero carbon emissions by 2050 in a major expansion of the airline’s commitment to a more sustainable aviation industry.

The national carrier will:

  • Immediately double the number of flights being offset
  • Cap net emissions from 2020 onwards
  • Invest $50 million over 10 years to help develop a sustainable aviation fuel industry

 

CUTTING NET CARBON EMISSION

This announcement means that Qantas is the only airline group to commit to cap its net emissions at 2020 levels, and the second to commit to net zero emissions by 2050.

In total, these commitments are the most ambitious carbon emissions targets of any airline group globally.

Qantas, Jetstar*, QantasLink and Qantas Freight will offset all growth in emissions from domestic and international operations from 2020.

This includes offsetting all net emissions from Project Sunrise, the carrier’s plan to operate non-stop flights from the east coast of Australia to London and New York, should the project proceed. This will also extend to domestic flying, meaning that growth on key routes like Melbourne-Sydney will be carbon neutral.

The aviation industry, which contributes around 2 per cent of global CO2 emissions, has committed to halving emissions by 2050 compared to 2005 levels. It was the first industry to make such commitments. Qantas had signed up to those commitments but will now exceed them.

Qantas will work with industry, research institutions and governments to develop the long-term solutions to significantly reduce greenhouse gas emissions from the aviation industry over the next three decades.

OFFSETTING FLIGHTS

Qantas currently operates the largest carbon offset program in the aviation industry, with around 10 per cent of customers booking flights on Qantas.com choosing to offset their flights.

From today, Qantas and Jetstar will double the number of flights offset by matching every dollar spent by customers who tick the box to fly carbon neutral. By matching our customers’ commitment, we expect even more people to offset their emissions.

This additional investment will see Qantas Future Planet, which is already the largest private sector buyer of Australian carbon credits, support more conservation and environmental projects in Australia and around the world.

Existing projects include protecting the Great Barrier Reef, working with Indigenous communities to reduce wildfires in Western Australia and securing over 7000 hectares of native Tasmanian forest.

SUSTAINABLE AVIATION FUEL

Qantas will invest $50 million over the next ten years to help develop a sustainable aviation fuel industry.

Sustainable aviation fuel can reduce carbon emissions by eighty per cent compared to traditional jet fuel, but are currently almost double the price.

Qantas will work with governments and private sector partners to support the development of sustainable aviation fuel in Australia and overseas to make it more viable and increase demand throughout the industry.

The national carrier will also continue to reduce its emissions through continued investment in more fuel efficient aircraft, more efficient operations such as single-engine taxiing, and smarter flight planning to reduce fuel burn.

Qantas is on track to replace its Boeing 747 fleet by the end of 2020 with the more fuel-efficient B787 Dreamliners, which burn 20 per cent less fuel than aircraft of a similar size. Jetstar’s A321neo (LR) aircraft,
which begin arriving next year, use 15 per cent less fuel than the aircraft they are replacing.

The Qantas Group continues to work with aircraft and engine manufacturers on next-generation technology that will deliver a further step-change in emissions reduction – however, innovations such as electric aircraft engines are still some time away.

CEO COMMENTS

Qantas Group CEO Alan Joyce said these commitments would make Qantas a leader in the aviation industry’s efforts to reduce carbon emissions.

“We recognise that airlines have a responsibility to cut emissions and combat climate change. We’ve already made some good progress, especially by investing in newer aircraft that have a much smaller carbon footprint.

“We want to do more, and faster. We’re effectively doubling our carbon offsetting program from today and we’re capping our net emissions across Qantas and Jetstar from 2020 so that all new flying will be carbon
neutral.

“Qantas offsets all of its own travel needs and so do many of our customers. By matching their efforts, we’re hoping it will encourage even more people to offset and the program will keep growing.

“These short-term actions will go towards a longer-term goal of being completely net carbon neutral by 2050. It’s ambitious, but achievable.

“Innovation is going to be key. We’re investing $50 million to hopefully kickstart a sustainable aviation fuel industry in Australia. We know from our own trials that the technology works but we need to get to a scale of production where it’s a practical substitute.

“Concerns about emissions and climate change are real, but we can’t lose sight of the contribution that air travel makes to society and the economy. The industry has already come a long way in cutting its footprint and the solution from here isn’t to simply ‘fly less’ but to make it more sustainable.

“We’re doing this because it’s the responsible thing to do, but hopefully it will also encourage more people to choose Qantas and Jetstar because of the action we’re taking,” added Mr Joyce.

Copyright Photo: Gordon Reid via John Adlard.

In other news, Qantas has completed precautionary inspections of thirty-three 737NG aircraft, checking for hairline cracks that have appeared in some high cycle aircraft worldwide.

The cracks relate to the ‘pickle fork’ structure, which is located between the wing and fuselage. Qantas brought forward these precautionary checks by up to seven months and completed them within seven days.

Of the 33 of Qantas’ 737 aircraft that required inspection, three were found to have a hairline crack in the pickle fork structure. These aircraft have been removed from service for repair.

The aircraft had all completed around 27,000 cycles. Any aircraft with more than 22,600 cycles was inspected, in line with advice from regulators.

Qantas will minimise any customer impact from having these aircraft temporarily out of service.

Qantas is working with Civil Aviation Safety Authority and Boeing to resolve this issue, which involves some complex repair work. All three aircraft are expected to return to service before the end of the year.

CEO of Qantas Domestic, Andrew David said: “As people would expect with Qantas, we’ve gone above what was required to check our aircraft well ahead of schedule.

“We would never fly an aircraft that wasn’t safe. Even where these hairline cracks are present they’re not an immediate risk, which is clear from the fact the checks were not required for at least seven months.

“Unfortunately, there were some irresponsible comments from one engineering union, which completely misrepresented the facts. Those comments were especially disappointing given the fantastic job our engineers have done to inspect these aircraft well ahead of schedule, and the priority they give to safety every day of the week,” added Mr David.

Qantas will continue to monitor aircraft that are in scope of the airworthiness directive as inspections fall due.

Top Copyright Photo: QANTAS Airways Boeing 787-9 Dreamliner VH-ZNJ (msn 66074) (100 Centenary) PAE (Nick Dean). Image: 948008.

QANTAS Airways aircraft slide show: