Tag Archives: QANTAS Airways

QANTAS operates its first Boeing 747 farewell flight

QANTAS Airways Boeing 747-438 ER VH-OEJ (msn 32914) BNE (Peter Gates). Image: 908305.

QANTAS Airways today (July 13) operated its first Boeing 747-400 farewell flight from Sydney with VH-OEJ.

Video:

The special flight s continue on July 15 in Brisbane and on July 17 in Canberra.

Previously QANTAS announced a program of events to farewell its last remaining Boeing 747 and provide Australians the opportunity to say goodbye to the much loved “Queen of the Skies” ahead of its retirement from the national carrier’s fleet.

The airline will operate three one-hour “farewell jumbo joy flights” departing from Sydney, Canberra and Brisbane, in response to requests from employees and customers for one final chance to fly on the aircraft.

QANTAS 747 Fleet Captain Owen Weaver said the 747 has a special place in the hearts of many Australians.

“The 747 has been a magnificent aircraft and it’s fitting that we celebrate the end of five decades of history-making moments for the national carrier and aviation in Australia,” Captain Weaver said.

“Since the first 747 joined the Qantas fleet in 1971, these aircraft have operated numerous rescue flights to bring Australians home during times of crisis and provided a safe passage for many travellers taking their first international flight to or from Australia.

“These three flights will offer the final opportunity to fly on the Qantas 747 before it leaves, with some of our frequent flyers and aviation enthusiasts as fond of the aircraft as we are, having spent thousands of hours onboard over the years.

“There is an enormous amount of nostalgia and affection associated with our 747 and for those who miss out on a seat on the flight, they will at least be able to catch a glimpse of the aircraft as it takes to Australian skies for the last time.”

The flights will go on sale at midday on Wednesday 8 July on Qantas.com and will operate on Monday, July 13 (Sydney), Wednesday, July 15 (Brisbane) and Friday, July 17 (Canberra). Economy fares cost $400 and a small number of Business Class tickets will be available for $747 with additional extras included.

Seats will be limited to maximise passenger comfort (in line with other previously operated joy flights).

The flights will be operated on a cost-recovery basis and profits will be donated to the HARS Aviation Museum at Albion Park (Wollongong) and the Qantas Founders Museum in Longreach to support their efforts to preserve and promote the 747 legacy for future generations. Both museums have a QANTAS 747 on public display.

The final 747-400 in the fleet will depart Sydney at approximately 2 pm on July 22, 2020 as flight QF7474.

Prior to its final departure on July 22, QANTAS will host a hangar farewell event for employees.

Top Copyright Photo: QANTAS Airways Boeing 747-438 ER VH-OEJ (msn 32914) BNE (Peter Gates). Image: 908305.

QANTAS Airways aircraft slide show:

QANTAS to operate three Boeing 747 farewell flights this month

QANTAS Airways this month plans to operate 3 Boeing 747-400 “QF747” farewell flights.

The special flights are open for reservation and are scheduled to operate from Sydney on July 13, 2020, Brisbane on July 15, 2020 and Canberra on July 17, 2020 according to Airlineroute.

For the record, QANTAS operated the last regularly scheduled Boeing 747-400 revenue flight (QF28) on March 29, 2020 with VH-OEE between Santiago and Sydney.

The Boeing 747-400 fleet has been grounded due to COVID-19 and will be retired early with these special flights.

QANTAS introduced the Boeing 747 type in 1971.

QANTAS Airways aircraft photo gallery:

QANTAS Group announces major changes

QANTAS Group has made this announcement:

  • Three year strategy to guide recovery and return to growth in changed market.
  • Costs reduced by $15 billion during three year period of lower activity; $1 billion in ongoing cost savings per annum from FY23.
  • Around 100 aircraft to be grounded for up to 12 months; some for longer.
  • Job losses and extended stand downs to manage long period of reduced flying (especially internationally).
  • Equity raising of up to $1.9 billion to accelerate recovery and position for new opportunities.
    • Approximately $1.4 billion fully underwritten institutional Placement and up to $500 million non-underwritten Share Purchase Plan[1].
    • Issue price for new shares under the Placement of $3.65.
    • Pro forma liquidity of $4.6 billion following completion of the underwritten Placement and before the SPP proceeds, with $3.6 billion of cash and $1.0 billion of undrawn facilities.

 

The Qantas Group has announced a three year plan to accelerate its recovery from the COVID-19 crisis and create a stronger platform for future profitability, long-term shareholder value and to preserve as many jobs as possible.

The immediate focus of the plan is to:

  • Rightsize the Group’s workforce, fleet and other costs according to demand projections, with the ability to scale up as flying returns.
  • Restructure to deliver ongoing cost savings and efficiencies across the Group’s operations in a changed market.
  • Recapitalise through an equity raising to strengthen the Group’s financial resilience for recovery and the opportunities it presents.

Subsequent phases of the plan focus on the increasing ramp up of flying and pursuing new opportunities – including the airline’s ambition for more non-stop international flights.

The plan is designed to account for the uncertainty associated with the crisis, preserving as many key assets and skills as the Group can reasonably carry to support the eventual recovery. COVID represents the biggest challenge ever faced by global aviation and the Group’s response to the crisis is scaled accordingly. This unfortunately means a large number of job losses across Qantas and Jetstar.

The plan targets benefits of $15 billion over three years, in line with reduced flying activity including fuel consumption savings, and delivering $1 billion per annum in ongoing cost savings from FY23 through productivity improvements across the Group. Key actions of the plan include:

  • Reducing the Group’s pre-crisis workforce by at least 6,000 roles across all parts of the business.
  • Continuing the stand down for 15,000 employees, particularly those associated with international operations, until flying returns.
  • Retiring Qantas’ six remaining 747s immediately, six months ahead of schedule.
  • Grounding up to 100 aircraft for up to 12 months (some for longer), including most of the international fleet. The majority are expected to ultimately go back in to service but some leased aircraft may be returned as they fall due.
  • A321neo and 787-9 fleet deliveries have been deferred to meet the Group’s requirements.

The cost of implementing the plan is estimated at $1 billion, with most of this realised during FY21.

CEO COMMENTARY

Announcing the plan Qantas Group CEO Alan Joyce said: “The Qantas Group entered this crisis in a better position than most airlines and we have some of the best prospects for recovery, especially in the domestic market, but it will take years before international flying returns to what it was.

“We have to position ourselves for several years where revenue will be much lower. And that means becoming a smaller airline in the short term.

“Most airlines will have to restructure in order to survive, which also means they’ll come through this leaner and more competitive. For all these reasons, we have to take action now.

“Adapting to this new reality means some very painful decisions. The job losses we’re announcing today are confronting. So is the fact thousands more of our people on stand down will face a long interruption to their airline careers until this work returns.

“What makes this even harder is that right before this crisis hit, we were actively recruiting pilots, cabin crew and ground staff. We’re now facing a sudden reversal of fortune that is no one’s fault, but is very hard to accept.

“This crisis has left us no choice but we’re committed to providing those affected with as much support as we can. That includes preserving as many jobs as possible through stand downs, offering voluntary rather than compulsory redundancies where possible, and providing large severance payouts for long serving employees in particular.

“As we’ve done throughout this crisis, our decisions are based on the facts we have now and the road we see in front of us. Our plan gives us flexibility under a range of scenarios, including a faster rebound or a slower recovery.

“Despite the hard choices we’re making today, we’re fundamentally optimistic about the future. Almost two-thirds of our pre-crisis earnings came from the domestic market, which is likely to recover fastest – particularly as state borders prepare to open. We have the leading full service and low fares airlines in Australia, where distance makes air travel essential, and diversified earnings through Qantas Loyalty.

“We still have big ambitions for long haul international flights, which will have even more potential on the other side of this.

“As a business, recapitalising means we can get ready sooner for new opportunities, returning to profit and building long term shareholder value. As the national carrier, we remain committed to supporting tourism, connecting regional communities and safely flying millions of people every year.”

EQUITY RAISING

The Board has today announced that the Group will seek to raise up to $1.9 billion, comprising of a fully underwritten institutional Placement to raise approximately $1,360 million and a non-underwritten Share Purchase Plan for eligible existing shareholders to participate of up to $500 million[1].

Proceeds from the Equity Raising will be used to accelerate the Group’s recovery, strengthen its balance sheet and position it to capitalise on opportunities aligned with its strategy.

The Placement issue price of $3.65 per share represents a 12.9% discount to the last traded price of $4.19 on 24 June 2020.

The approximately 372.7 million new fully paid ordinary shares issued under the Placement represents a 25% increase to total shares on issue – which itself has decreased by more than a third through share buybacks in recent years.

IMPACT ON OUR PEOPLE

Of the Group’s 29,000 people, around 8,000 are expected to have returned to work by the end of July this year. It’s anticipated that this will increase to around 15,000 by the end of calendar year 2020 in line with the opening up of domestic flying, and increase further during calendar 2021 and 2022 as the international network returns, reaching 21,000 active employees by June 2022.

Redundancies are proposed to manage a surplus of around 6,000 roles, with the temporary surplus of around 15,000 managed through a mix of stand down, annual leave and leave without pay.

Stand-ups will increase as travel restrictions lift and flying returns. This allows the Group to preserve as many jobs as possible for the longer term and respond faster if recovery timelines improve.

In line with its obligations, the Group will consult with relevant unions on the proposed job losses announced today. These span the following areas of Qantas and Jetstar:

  • Non-operational – at least 1,450 job losses, mainly in corporate roles, due to less flying activity.
  • Ground operations – at least 1,500 job losses across airports, baggage handling, fleet presentation and ramp operations due to less flying activity.
  • Cabin crew – at least 1,050 job losses due to early retirement of the 747s and less flying activity. A further 6,900 cabin crew will be on stand down from July 2020 onwards.
  • Engineering – at least 630 job losses due to 747 retirement, less flying activity (particularly of the wide-body fleet) and redistribution of work from Jetstar’s Newcastle base to make better use of existing maintenance capacity in Melbourne.
  • Pilots – at least 220 job losses mostly due to early retirement of the 747s. A further 2,900 pilots will be on stand down from July 2020 onward.

Additional reduction in total roles will result from contractors, particularly in corporate areas such as IT, not returning.

ASSET IMPAIRMENTS

While most of the Group’s long-haul aircraft are expected to steadily return to service over time, there is significant uncertainty as to when flying levels will support its 12 Airbus A380s.  These assets will be idle for the foreseeable future, which represents a significant percentage of their remaining useful life. As a result, the carrying value of the A380 fleet, spare engines and spare parts will be written down to their fair value, resulting in an estimated non-cash impairment charge in the FY20 statutory result. This represents the majority of the asset impairment charge of $1.25–$1.4 billion, outlined in the table below. As a consequence of the writedown, future depreciation expenses will reduce.

FUEL HEDGING

The Group’s fuel was fully hedged for the second half of FY20, and 90% hedged for the first half of FY21.  With the significant decline in flying activity, the Group’s overall capacity flown has resulted in a substantial reduction in fuel consumption from April 2020 and the anticipated decline in consumption to June 2021 will lead to the non-cash recognition of hedge ineffectiveness of $550–$600 million in the FY20 statutory result.

FY20 FINANCIAL PERFORMANCE

After reporting a strong Underlying Profit Before Tax of $771 million in the first half of FY20, the Group saw a significant reduction in revenue during the second half. By taking swift action to reduce its cash burn as travel demand evaporated, the Group expects to report a full year result between breakeven and a small Underlying Profit Before Tax.

Qantas Loyalty is expected to make the largest positive contribution to this result, with only a 5%–10% reduction in earnings compared to FY19 as a result of the impact of COVID on travel related products and credit card spend. The program continues to see strong levels of engagement, with a range of initiatives planned over the next six months to maintain and improve its value to members and partners.

Qantas Freight performed strongly, driven by major increases in ecommerce that are also expected to continue.

The table below reflects the Group’s current expectations of significant items it expects to recognise outside of its Underlying FY20 result.

Items outside of Underlying FY20 1H20 Impact
(previously reported)
Estimated FY20 impact (subject to review and audit processes)
Transformation costs and discretionary bonuses to non-executive employees awarded in prior years $123 million ~$200 million
Recovery plan restructuring costs including redundancies NIL $600-700 million
Asset impairments including the A380 fleet (non-cash) NIL $1,250-1,400 million
Hedge ineffectiveness[2] (non-cash) NIL $550-600 million[3]
Total $123 million ~$2.8 billion

 

CURRENT FINANCIAL POSITION

Following completion of the underwritten Placement, the Group’s available liquidity is expected to be $4.6 billion excluding the SPP proceeds, including a $1 billion undrawn facility. As at 31 May 2020, pro forma net debt is expected to be $4.7 billion with no major debt maturities until June 2021 and no financial covenants on its debt.

CEO TENURE

At the Board’s request, Alan Joyce has agreed to remain Qantas Group CEO as the recovery plan is implemented and through to at least the end of FY23. This will provide the leadership, experience and stability required as the Group navigates this incredibly challenging period.

REVOCATION OF INTERIM DIVIDEND

On 19 March 2020, the Group announced the deferral of its interim dividend due to uncertainty caused by the unfolding coronavirus crisis.

This uncertainty has now crystallised into a significant detrimental impact on the Group’s earnings and cash position. Further, the fully franked nature of the interim dividend was based on franking credits expected from taxable profits in the second half, which will now not materialise.

Accordingly, the Board has decided to revoke the interim dividend, avoiding the outflow of $201 million of cash and helping to maintain strong liquidity in the face of this unprecedented crisis. Decisions on future dividends will continue to be made in-line with the Group’s financial framework.

EQUITY RAISING – TRANSACTION SUMMARY

Placement

The approximately $1,360 million Placement is fully underwritten and will be offered to institutional investors at $3.65 per share (Placement Price), representing a 12.9% discount to the last traded price of $4.19 on Wednesday 24 June 2020. The Placement will result in the issue of 372.7 million new shares (Placement Shares), representing approximately 25.0% of Qantas’ existing shares on issue.

The Placement is being conducted today, Thursday, 25 June 2020, and Qantas’ shares will remain in a trading halt pending completion of the Placement.

The Placement is within Qantas’ placement capacity under the Temporary Extra Placement Capacity Class Waiver Decision (as amended) effective from 23 April 2020, and accordingly no shareholder approval is required in connection with the Placement.

It is intended that eligible existing institutional shareholders who bid for up to their ‘pro-rata’ share of new shares under the Placement will be allocated their full bid, on a best endeavours basis.  For the remaining shares under the Placement, Qantas will seek to prioritise allocations to existing shareholders and then introduce new shareholders, in each case based on factors including likelihood of long term support for the Group, the nature of the investor, support to date and existing holdings (if applicable) and the size and timeliness of bids into the book.

Share Purchase Plan (SPP)

Eligible shareholders in Australia and New Zealand will have the opportunity to apply for up to $30,000 of new fully paid ordinary shares (SPP Shares) free of any brokerage, commission and transaction costs.

The price paid by eligible shareholders for SPP Shares will be the lesser of:

  • the Placement Price; and
  • a 2.5% discount (rounded down to the nearest cent) to the 5-day VWAP of Qantas shares up to, and including, the closing date of the SPP (expected to be 22 July 2020).

Qantas considers that the SPP will cater for the vast majority of its non-institutional shareholders, enabling them to participate and potentially increase their relative percentage holdings in Qantas.

The Qantas Board has determined to cap the size of the SPP at $500 million, in aggregate.

As the SPP is not underwritten, the SPP may raise more or less than this amount. If the SPP raises more than $500 million, Qantas may decide in its absolute discretion to accept applications (in whole or in part) that result in the SPP raising more than $500 million. If Qantas decides to conduct any scale back of applications, for example because the aggregate amount applied for under the SPP exceeds Qantas’ requirements, the scale back will be applied on a pro rata basis to shareholdings of participating eligible shareholders at the record date of the SPP.

Further details of the SPP will be provided to eligible shareholders in due course. A SPP booklet will be sent to eligible shareholders on 2 July 2020. The closing date for applications by eligible shareholders is 22 July 2020.

Eligible shareholders wishing to acquire new shares under the SPP will need to apply in accordance with the instructions in the SPP booklet.

The Placement Shares and SPP shares will rank equally in all respects with Qantas’ existing ordinary shares from the date of allotment.

A timetable in respect to the Placement and SPP is provided at Appendix A.

Under ASX listing rules, Qantas Directors are not entitled to participate in the Placement, but can (and intend to) participate fully in the SPP if they are Australian/New Zealand residents.

QANTAS Airways announces “Fly Well” program

QANTAS Airways has made this announcement:

  • Range of measures introduced to ensure a safe travel environment and give extra peace of mind.
  • Masks on board, hand sanitising stations and enhanced aircraft cleaning among the improvements.
  • More flexibility added to bookings so people can plan with confidence.

Qantas and Jetstar will roll out a series of wellbeing improvements to give peace-of-mind in preparation for domestic travel restrictions easing.

The ‘Fly Well’ program brings together a number of temporary measures already in use by the Qantas Group, including on repatriation flights from virus hot-spots, and represents a combination of best-practice medical advice and feedback from customers.

Rolling out from 12 June, the key measures at each point of the journey will be:


Pre-flight

  • Information sent to all customers before they fly, so they know what to expect.
  • Contactless check-in (via online/app) and self-serve bag drop strongly encouraged, including use of Q Bag Tags.
  • Hand sanitising stations at departure gates.
  • Temporary changes to Qantas Lounges, including increased physical distancing, hand sanitising stations, enhanced disinfection of surfaces and adjustments to food and drink service.
  • Working with airports on other safeguards in the terminal, including regular disinfection of security screening points and installing hygiene screens at airline customer service desks, wherever practical.


On board

  • Masks provided to all passengers on each flight – while not mandatory from a safety point of view, they are recommended to be worn in the interests of everyone’s peace-of-mind.
  • Enhanced cleaning of aircraft with a disinfectant effective against Coronaviruses, with a focus on high contact areas – seats, seatbelts, overhead lockers, air vents and toilets.
  • Sanitising wipes given to all passengers to wipe down seat belts, trays and armrests themselves, if preferred.
  • Simplified service and catering to minimise touchpoints for crew and passengers.
  • Passengers asked to limit movement around cabin, once seated.
  • Sequenced boarding and disembarkation to minimise crowding.

In addition, the air conditioning systems of all Qantas and Jetstar aircraft are already fitted with hospital-grade HEPA filters, which remove 99.9% of all particles including viruses. Air inside the cabin is refreshed on average every five minutes during flight.

All airline employees are required to follow strict personal hygiene protocols, for the benefit of themselves and others.

All passengers are encouraged to download the Australian Government’s COVIDSafe app as part of improving the ability of health authorities to contain the spread of Coronavirus. In-line with public health advice, anyone with cold and flu like symptoms should stay at home.


COMMENTS

Qantas Group CEO Alan Joyce said: “Safety is absolutely core to how we operate and that applies to new challenges like managing the risk of coronavirus so people can fly with confidence.

“From the early rescue flights we operated right into Wuhan and then more recently bringing Australians back from places like the US and Europe, we have a lot of experience at creating a safe cabin environment for passengers and crew.

“We’re relying on the cooperation of passengers to help make these changes work for everyone’s benefit, and we thank them in advance for that. Given the great job Australians have done at flattening the curve, we’re confident they’ll respond positively to these temporary changes to how we fly.

“We’ll continue to work with government and monitor the rollout of these measures closely, which are designed  with safety in mind and help people feel comfortable given the new norms that have emerged in response to the Coronavirus crisis,” added Mr Joyce.

Qantas Group Medical Director, Dr Ian Hosegood, said: “The data shows that actual risk of catching Coronavirus on an aircraft is already extremely low. That’s due to a combination of factors, including the cabin air filtration system, the fact people don’t sit face-to-face and the high backs of aircraft seats acting as a physical barrier. As far as the virus goes, an aircraft cabin is a very different environment to other forms of public transport.”

“Social distancing on an aircraft isn’t practical the way it is on the ground, and given the low transmission risk on board, we don’t believe it’s necessary in order to be safe. The extra measures we’re putting place will reduce the risk even further,” added Dr Hosegood.

The Fly Well program will be reviewed after its first month of operation and shaped by customer feedback and medical advice.


IMPROVED FLEXIBILITY FOR CUSTOMERS

Customer research shows 98 per cent of frequent flyers are planning their next trip once restrictions lift. To help improve flexibility as travel restrictions are steadily adjusted, Qantas and Jetstar are introducing more flexibility from today.

  • Domestic : Customers can book any Qantas or Jetstar Australian domestic flight between 21 May and 30 June 2020, for travel between 12 June and 31 October 2020, and we will waive the change fee one time if you decide to change the date of your travel. Customers will have to cover any fare increase (if relevant) for the new booking.
  • International flight credit extension: Further flexibility has been introduced for international bookings (excluding Trans-Tasman). Customers with an existing Qantas or Jetstar international flight booking, for travel between 1 August and 31 October 2020, who wish to change their plans, can cancel their booking and retain the full value as a flight credit. Flight credits must be requested by 30 June 2020 and are valid for booking and travel across domestic and international services by 31 December 2021. Jetstar credit vouchers allow up to two years to travel from issue date. Customers will have to cover any fare increase (if relevant) for the new booking.

If a flight is cancelled by us, customers will be rebooked on the next available flight at no additional cost. Alternatively, customers can choose a flight credit or a refund.

QANTAS Airways aircraft photo gallery:

QANTAS secures a further $550 million in debt funding

QANTAS Airways has made this announcement:

  • Secured a further $550 million in debt funding.
  • Strong cash balance and lower cash burn rate provides headroom to manage through current crisis and recovery.
  • Extension of flight cancellations for June and July (schedules currently still at pre-coronavirus levels).
  • Scope to restore some services at relatively short notice as restrictions lift.

The QANTAS Group has continued to strengthen its ability to deal with the short and likely long-term impacts of the coronavirus crisis.

It has also extended flight cancellations from end-May through to the end of July, which were still at pre-coronavirus levels – but some capacity can be added back in if domestic and Trans-Tasman restrictions ease in coming weeks.

Given the consequences of this crisis for aviation, the Group is today releasing a more detailed update of its liquidity position in place of a quarterly trading update. This announcement supersedes assumptions outlined at Half Year Results in February 2020.


LIQUIDITY STATUS

The QANTAS Group today announces that it has secured a further $550 million in funding against three of its wholly-owned Boeing 787-9 aircraft. This follows the $1.05 billion raised in March against seven 787-9s.

Net debt is now within the middle of the target range, at $5.8 billion. The Group has no financial covenants on any existing or new debt facilities and no significant debt maturities until June 2021.

The Group has sufficient liquidity to respond to a range of recovery scenarios, including one where the current trading conditions persist until at least December 2021. The Group currently has $2.7 billion in unencumbered aircraft assets and can raise funds against these if required.

At the start of the crisis, the Group acted quickly to wind down cash burn through employee stand downs, a pause on virtually all capital and operating expenditure, and revised agreements with key suppliers.

As a result, and based on current conditions, the Group expects to reach a net cash burn rate of $40 million per week by the end of June 2020.

Since the last cash balance update in March, the Group has seen outflows including a $250 million bond repayment, elevated levels of annual leave payments from standing down more than 25,000 employees ahead of the JobKeeper program starting, and payment of bills from its pre-crisis levels of flying activity.

As at close of business 4 May 2020, total short-term liquidity stands at $3.5 billion, including a $1 billion undrawn facility.


ONGOING FLIGHT CANCELLATIONS AND EMPLOYEE STAND DOWNS

The QANTAS Group is currently operating around 5 percent of its pre-crisis domestic passenger network and around 1 percent of its international network on an Available Seat Kilometre basis. On a flying hours basis – which includes charters for the resources sector at 75 per cent of pre-Coronavirus levels and passenger aircraft flying as freighters – the Group is operating 13 percent of its domestic network and 6 percent of international.

Under the circumstances, QANTAS and Jetstar will now extend existing domestic and Trans-Tasman flight cancellations beyond end-May through to the end of June 2020. International flight cancellations will be extended through to end-July 2020.

The initial easing of government restrictions suggests some domestic travel may start to return before the end of July – though initial demand levels are hard to predict. The Group will continue to monitor the situation and can increase capacity with a minimum lead time of around one week.

As a result of the crisis’ impact on travel, the current stand down of employees will now be extended until at least the end of June. The impact of this stand down is deeply regrettable but has been greatly softened by the Australian Government’s JobKeeper program, which the Group commenced paying several weeks ahead of the official payment start date.

The Group is also providing early access to annual and long service leave in addition to the significant leave balances among long-standing workers. A variety of other welfare mechanisms remain available.


ADVICE FOR CUSTOMERS

QANTAS and Jetstar customers with bookings impacted by the cancellations for June and July will be contacted directly and offered alternatives.

In response to feedback, travel credit conditions are being further improved. Customers booked on Qantas and Jetstar flights disrupted by the Coronavirus crisis will be able to split travel credits across multiple future bookings. This is on top of an extended period of time to use the credit. Full details are available on Qantas.com and Jetstar.com. Customers with bookings made through travel agents or third party websites (e.g. Webjet, Booking.com) will need to contact them directly.


FUEL HEDGING UPDATE
 

The QANTAS Group’s fuel needs were 100 percent hedged for most of FY20, which delivered significant benefits in the first half of the year but resulted in some hedging losses as fuel consumption dropped and oil prices fell as a result of the coronavirus crisis.

In early April, the Group closed out its over-hedged position through to September 2020. This avoided the precipitous falls in oil prices that occurred in the second half of April, and significantly lowered the Group’s exposure to further hedging losses.

The Group’s remaining Brent crude oil hedging to September 2020 is in outright options with no risk of further hedge losses. As at today, the cash impact of all foreign exchange and fuel hedging between now and the end of September 2020 is a A$145 million cash outflow[1].

The Group has some hedging beyond September with the majority of this being in outright options plus a base layer of collars. These collars remain subject to market price movements but are expected to be effective given they are likely to coincide with increased flying activity for the Group. There are no margin call obligations on the Group’s hedging.


QANTAS LOYALTY AND QANTAS FREIGHT UPDATES 

Qantas Loyalty continues to perform well, with external billings flowing from Frequent Flyer partners including financial services and retailers such as Woolworths. A partnership with fuel company BP has created a new opportunity for members to earn points via another consumer staple.

Before the Coronavirus crisis, two-thirds of all Qantas Points were earned on the ground, meaning that the opportunities for engaging the programs’ 13 million members remain high despite the pause in flying activity. A recent survey of members showed 85 per cent were planning to travel as soon as conditions allowed – a sentiment reflected in the fact most are saving their points for a redemption flight sometime in the future.

Qantas Freight has seen high volumes and achieved strong revenue for March and April. Its 12 dedicated freighters are heavily utilised and the airline’s passenger A330 and B787 aircraft have also been used to move cargo on services to Shanghai, Hong Kong and Tokyo, facilitating export of Australian produce and import of medical supplies. The domestic freighter network has seen high volumes due to e-commerce, with demand in recent weeks above the peak levels normally associated with Christmas.


CEO COMMENTARY

QANTAS Group CEO Alan Joyce said: “Our cash balance shows that we’re in a very strong position, which under the circumstances we absolutely have to be. We don’t know how long domestic and international travel restrictions will last or what demand will look like as they’re gradually lifted.

“Our ability to withstand this crisis and its aftermath is only possible because we’re tapping into a balance sheet that has taken years to build.

“Australia has done an amazing job of flattening the curve and we’re optimistic that domestic travel will start returning earlier than first thought, but we clearly won’t be back to pre-coronavirus levels anytime soon. With the possible exception of New Zealand, international travel demand could take years to return to what it was.

We’re expecting demand recovery to be gradual and it will be some time before total demand reaches pre-crisis levels. That means we need to think about what the QANTAS Group should look like on the other side of this crisis in order to succeed. Fleet, network and capital expenditure will all have to be reviewed but our commitment to serve communities across Australia will not change.

“The Government’s support of the aviation industry by underwriting some essential flying, and the support to the broader economy through JobKeeper, have been greatly appreciated. Public health initiatives like the COVIDSafe app are one of the ways we’ll be able to start travelling sooner, so we strongly encourage all Australians to download it.

“The QANTAS Group has literally thousands of suppliers and we’ve put the smaller ones at the front of the queue. We’re grateful to many of our major suppliers, including almost all the capital city airports, who have given us a lot of flexibility.

“I want to recognise our people for their continued support and understanding in the face of this crisis. In particular, those who’ve helped bring Australians home from overseas and kept an essential domestic and regional network running, carrying on what the national carrier has done for 100 years.”

 

[1] This outflow is factored into the average burn rate of $40 million post-June 2020.

QANTAS Airways parks its five Boeing 747-400 ERs

Type Retired: March 29, 2020 (flight QF28 SCL-SYD with VH-OEE)

QANTAS Airways, due to the coronavirus and sudden downturn in travel, has decided to park its five remaining Boeing 747-400 ERs. Previously it was planning to retire the type in February 2021. The airline hopes to operate some Boeing 747 revenue flights later this year when traffic returns.

On Thursday, March 26, 2020, a QANTAS Boeing 747-400 ER performed a flypast over Sydney Harbour before landing at SYD as a final salute to its hometown.

The last revenue flight (for now) was flight QF28 from Santiago, Chile to Sydney today (March 29). The flight was operated with the pictured Boeing 747-406 ER VH-OEE (top). Flight QF28 arrived in Sydney at 1730 (5:30 pm) local time on Sunday, March 29, 2020.

QANTAS previously retired the standard Boeing 747-400 in October 2019.

"City of Canberra", delivered on July 30, 1971

Above Copyright Photo: QANTAS Airways Boeing 747-238B VH-EBA (msn 20009) (Bruce Drum Collection). Image: 944371.

QANTAS has been an operator of the Boeing 747 since 1971. The first 747-238B (VH-EBA), named “Canberra” (above), was delivered to the airline on July 30, 1971 and arrived in Sydney on August 16, 1971. The type was introduced on the Sydney-Melbourne-Singapore route.

The 1995 blue version of "Nalanji Dreaming"

Above Copyright Photo: QANTAS Airways Boeing 747-338 VH-EBU (msn 23223) (Nalanji Dreaming) SYD (John Adlard). Image: 930000.

QANTAS has operated the 747-200B, 747SP (below), 747 Combi, 747-300 (above), 747-400 and the 747-400 ER.

"City of Gold Coast - Tweed" - Delivered on January 19, 1981

Above Copyright Photo: QANTAS Airways Boeing 747SP-38 VH-EAA (msn 22495) (Boeing – Christian Volpati Collection). Image: 944958.

When Cyclone Tracy devastated the city of Darwin on Christmas 1974, QANTAS established a world record for the most people ever carried on a single aircraft when it evacuated 673 people on a single Boeing 747 flight.

The first Boeing 747-400 arrived in 1989.

Top Copyright Photo: QANTAS Airways Boeing 747-438 ER VH-OEE (msn 32909) LAX (Michael B. Ing). Image: 931607.

QANTAS Airways aircraft slide show:

QANTAS Group secures $1.05 billion in additional funding, secured by seven Dreamliners

QANTAS Group has made this announcement:

The QANTAS Group has completed a new round of debt funding, securing $1.05 billion in additional liquidity to strengthen its position as it manages through the Coronavirus outbreak.

This debt has been secured against part of the Group’s fleet of unencumbered aircraft[1], which were bought with cash in recent years. The loan has a tenure of up to 10 years at an interest rate of 2.75 percent.

David Gray /Getty Images for Qantas

This funding increases the Group’s available cash balance to $2.95 billion with an additional $1 billion undrawn facility remaining available.

The Group’s net debt position remains at the low end of its target range, at $5.1 billion, with no major debt maturities until June 2021. In line with the rest of the QANTAS debt book, the new funding contains no financial covenants.

With a further $3.5 billion in unencumbered assets, the QANTAS Group retains flexibility to increase its cash balance as a prudent measure in the current climate. As previously announced, various steps have been taken to significantly reduce activity levels and costs given the dramatic revenue impact of the Coronavirus pandemic and the related travel restrictions on Jetstar and Qantas passenger services.

QANTAS Group CEO Alan Joyce said: “Over the past few years we’ve significantly strengthened our balance sheet and we’re now able to draw on that strength under what are exceptional circumstances. Everything we’re doing at the moment is focused on guaranteeing the long term future of the national carrier, including making sure our people have jobs to return to when we have work for them again.”

[1] Seven of the Group’s 11 wholly-owned Boeing 787-9s have been securitised against this funding.

QANTAS Airways aircraft photo gallery:

 

QANTAS Group cuts international flying by 90%, grounds around 150 aircraft

QANTAS Group has made this announcement:

As a result of significant falls in travel demand due to Coronavirus, and new government restrictions across multiple jurisdictions in recent days, QANTAS Airways and Jetstar Airways will make further and much larger cuts to domestic and international flying schedules.

To be phased in from the end of March 2020 onwards:

  • Total Group International capacity will be cut by around 90 percent until at least the end of May 2020. This is up from a 23 per cent reduction for the fourth quarter of FY20 announced last week and largely reflects the demand impact of severe quarantine requirements on people’s ability to travel overseas.
  • Total Group Domestic capacity will be cut by around 60 percent until at least the end of May 2020. This is a major increase from the 5 per cent reduction for the fourth quarter of FY20 and reflects a rapid decline in forward travel demand due to government containment measures, corporate travel bans and a general pullback from everyday activities across the community.
  • This represents the grounding of around 150 aircraft, including almost all of the Group’s wide-body fleet.
  • Previously announced cuts in place from end-May through to mid-September remain in place and are likely to be increased, depending on demand.

The route-by-route detail of these changes across QANTAS and Jetstar is currently being worked through and will be announced in coming days.

Despite the deep cuts, the national carrier’s critical role in transporting people and goods on key international, domestic, routes will be maintained.  This includes using some domestic passenger aircraft for freight-only flights to replace lost capacity from regular scheduled services. QANTAS’ fleet of freighters will continue to be fully utilized.

PEOPLE IMPACT

The precipitous decline in demand and resulting cuts to flying mean that the QANTAS Group is confronted with a significant labor surplus across its operations. Travel demand is unlikely to rebound for weeks or possibly months and the impact of this will be felt across the entire workforce of 30,000 people.

The QANTAS Group is working to manage this impact as much as possible, including through the use of paid and unpaid leave. This will be in addition to measures already announced, including three months of no pay for the CEO and Chairman, significant pay cuts for Group Executive Management and Board members, and cancelling of annual bonuses and an off-market buy back.

CUSTOMER IMPACT

The Group has issued a wide-ranging booking waiver for customers wanting to suspend their travel plans.

Customers with existing bookings on any domestic or international flight until May 31, 2020, who no longer wish to travel, can cancel their flight and retain the value of the booking as a travel credit voucher. This needs to be processed by March 31, 2020.

Customers who make a new domestic or international booking and later decide they no longer wish to travel, can cancel their flight and retain the value of the booking as a QANTAS travel credit or Jetstar travel voucher. This applies to bookings made from March 10, 2020 until March 31, 2020 for travel before May 31, 2020.

QANTAS Airways aircraft photo gallery:

QANTAS Group makes drastic cuts leaving only two Airbus A380s flying

The QANTAS Group has announced further cuts to its international flying, reducing capacity by almost a quarter for the next six months.

The latest cuts follow the spread of the Coronavirus into Europe and North America over the past fortnight, as well as its continued spread through Asia, which has resulted in a sudden and significant drop in forward travel demand.

These additional changes will bring the total international capacity reduction for QANTAS and Jetstar from 5 percent to 23 percent versus the same time last year and extend these cuts until mid-September 2020.

The biggest reductions remain focussed on Asia (now down 31 percent compared with the same period last year). Capacity reductions to the United States (down 19 percent), the UK (down 17 percent) and Trans-Tasman (down 10 percent) will also be made in line with forward booking trends.

CHANGES TO SERVICES

Rather than exit routes altogether, QANTAS will use smaller aircraft and reduce the frequency of flights to maintain overall connectivity.

This approach results in eight of the airline’s largest aircraft, the Airbus A380, grounded until mid-September. A further two A380s are undergoing scheduled heavy maintenance and cabin upgrades, leaving two of its A380s flying.

In response to strong customer demand for the direct Perth-London service, the existing Sydney-Singapore-London return service (QF1 and QF2) will be temporarily re-routed to become a Sydney-Perth-London service from April 20, 2020.

The start of QANTAS’ new Brisbane-Chicago route will be delayed from April 15 to mid-September.

Jetstar will make significant cuts to its international network, including suspending flights to Bangkok and reducing flights from Australia to Vietnam and Japan by almost half. Jetstar’s daily Gold Coast to Seoul flight was suspended last week.

(See table below for more detail of international network changes.)

Domestically, QANTAS and Jetstar capacity reductions will be increased from 3 per cent to 5 per cent[1] through to mid-September 2020, in line with broader economic conditions.

In total, this is the equivalent of grounding 38 Qantas and Jetstar aircraft[2] across the international and domestic network. The Group’s total capacity reduction changes from 4 per cent (announced on February 20) to 17 percent for the last quarter of FY20.

Given the reduced flying across the QANTAS Group fleet, maintenance work will be brought forward where possible to make best use of this time.

IMPACT ON FINANCIAL PERFORMANCE

The Group is taking decisive action to mitigate the significant adverse impact of Coronavirus on demand, including longer range capacity cuts that improve the business’ ability to reduce costs. However, given the dynamic and uncertain nature of this situation, it is not possible to provide meaningful guidance at this time on the size of that impact on Group earnings for the remainder of FY20.

In line with its Financial Framework the Group is in a strong position, with low debt levels and a long debt maturity profile, $1.9 billion in cash plus a further $1 billion in undrawn facilities and $4.9 billion in unencumbered assets.

To help maintain this position in the face of current uncertainty, the Board has decided to cancel the off-market buyback announced in February, which will preserve $150 million in cash. The interim dividend of 13.5 cents per share will still be paid on 9 April.

COST REDUCTION MEASURES

In addition to cutting capacity, a number of cost reduction measures will be triggered across the QANTAS Group, including:

  • Annual management bonuses set to zero for FY20.
  • For the remainder of FY20:
    • QANTAS Chairman will take no fees.
    • Group CEO will take no salary.
    • QANTAS Board will take a 30 percent reduction in fees.
    • Group Executive Management will take a 30 percent pay cut.
  • Freeze of all non-essential recruitment and consultancy work.
  • Asking all QANTAS and Jetstar employees to take paid or unpaid leave in light of reduced flying activity.

A material drop in fuel price has provided a significant cost benefit in addition to the saving from lower consumption. The Group’s total fuel cost is now expected to be $3.74b[3] (excluding the benefit of capacity reductions compared with the same time last year) with limited participation to further falls in Brent crude prices.

CEO COMMENTARY

Announcing the changes, QANTAS Group CEO Alan Joyce, said: “In the past fortnight we’ve seen a sharp drop in bookings on our international network as the global coronavirus spread continues.

“We expect lower demand to continue for the next several months, so rather than taking a piecemeal approach we’re cutting capacity out to mid-September. This improves our ability to reduce costs as well as giving more certainty to the market, customers and our people.

“We retain the flexibility to cut further or to put capacity back in as this situation develops.

“The QANTAS Group is a strong business in a challenging environment. We have a robust balance sheet, low debt levels and most of our profit comes from the domestic market. We’re in a good position to ride this out, but we need to take steps to maintain this strength.

“When revenue falls you need to cut costs, and reducing the amount of flying we do is the best way for us to do that.

“Less flying means less work for our people, but we know coronavirus will pass and we want to avoid job losses wherever possible. We’re asking our people to use their paid leave and, if they can, consider taking some unpaid leave given we’re flying a lot less.

“Annual management bonuses have been set to zero and the Group Executive team will take a significant pay cut for the rest of this financial year.

“It’s hard to predict how long this situation will last, which is why we’re moving now to make sure we remain well positioned. But we know it will pass, and we’ll be well positioned to take advantage of opportunities when it does.”

ADVICE FOR CUSTOMERS

QANTAS and Jetstar will contact customers affected by these changes in the coming week. Customers who booked via a travel agent (including online travel agents) will be contacted by their agent rather than the airline.

Typically, customers flying internationally will be offered an alternative flight via another capital city or a partner airline, or an alternative day. Disruption to domestic passengers is expected to be minimal given the continued high frequency on most routes.

The latest information will be published on Qantas and Jetstar websites. Customers are encouraged to check this before calling the airline.

To provide customers with greater flexibility and confidence when they book, Qantas and Jetstar will waive change fees for new international bookings made from today until the end of March, if customers change their travel plans[4]. This applies to travel commencing up to June 30, 2020 and is limited to one free change per customer. Customers will need to pay any fare difference.

SUMMARY OF QANTAS GROUP NETWORK CHANGES

Route Change Effective dates (until mid-Sept 2020)
Asia
Sydney-Tokyo (Haneda) B747 replaced by smaller A330 30 March
Melbourne-Singapore  – 7 return flights per week cancelled (QF 37/38)

– B787 replaced by larger A330 on 7 return flights per week (QF 35/36)

– 20 April– 4 May
North America 
Brisbane-Chicago Route launch postponed Was to start 15 April
Brisbane-San Francisco Route suspended (3 return flights per week) 18 April
Sydney-San Francisco B787 replaced by larger B747 18 April
Melbourne-San Francisco Route suspended (4 return flights per week) 18 April
Sydney-Dallas/Fort Worth A380 replaced by smaller B787 20 April
Melbourne-Los Angeles A380 replaced by smaller B787 1 June
Sydney-Vancouver Seasonal service suspended (3 return flights per week) June and July only
United Kingdom
Sydney-London (Heathrow) – Flights to operate via Perth (instead of Singapore)then non-stop to London.

– Perth-London to become double daily as a result.

– A380 replaced by smaller B787

20 April
South America
Sydney-Santiago Delaying planned B787 introduction and continuing with B747 1 August

Note: The suspension of the A380 and First Class from Singapore routes will see the QANTAS First Lounge in Singapore close temporarily, with customers instead invited to use the adjacent QANTAS Business Lounge.

Note: QANTAS Boeing 787 has approx. 250 less seats than an A380.  

 

QANTAS – Extension of previously announced cancellations

(Until mid-Sept 2020 unless stated)

Route Change
Sydney-Shanghai Route continues to be suspended until at least mid-July (7 flights per week)(sole route to mainland China)
Sydney-Hong Kong Reduced from 14 to 7 return flights per week
Melbourne-Hong Kong Reduced from 7 to 4 return flights per week (1 additional cancellation per week from previously announced cuts)
Brisbane-Hong Kong Reduced from 7 to 3 return flights per week (1 additional cancellation per week from previously announced cuts)

 Note: Further capacity reductions will also be made on flights to Japan and New Zealand, with other Asian routes under evaluation.

 

Jetstar Airways – Summary of New Changes

Routes Change Effective date (until end June but may be extended)
Asia
Melbourne-Bangkok Route suspended 1 May
Sydney/Melbourne-Ho Chi Minh Flights reduced by over 50 per cent 1 May
Japan routes Flights reduced by almost 40 per cent 20 May
Brisbane-Bali Minor flight reductions 1 May

Note: Further capacity reductions will also be made on flights to New Zealand, with other Asian routes are under evaluation.

 

Jetstar Airlines in Asia – Summary of changes

Jetstar Asia (based in Singapore) will cut capacity by almost 40 percent with reductions in frequencies across the network. Singapore to Taipei and Osaka routes will be suspended.

Jetstar Japan has suspended its international services to Hong Kong, Taipei and Shanghai until at least the end of May and will reduce flights to Manila. Further reductions will be made to its Japanese domestic network.

Jetstar Pacific (based in Vietnam) has also suspended all international routes to the end of April, with the exception of Ho Chi Minh-Bangkok where flights have been halved. Further reductions are being made to its Vietnamese domestic network.

[1] Versus Q4 FY19.

[2] Includes seven Jetstar Asia (Singapore) aircraft and nine aircraft across Jetstar Japan and Jetstar Pacific (Vietnam).

[3] Compared with estimate of $3.85b at 20 February 2020.

[4] Changes need to be made at least three days before the date of travel.

 

QANTAS Airways aircraft photo gallery:

Sydney Morning Herald: QANTAS cleaning standards are a coronavirus risk

From the Sydney Morning Herald:

QANTAS Airways has been ordered to improve how it cleans its aircraft after a safety inspection by SafeWork NSW revealed it was potentially putting its passengers and workers at risk.

Read the full report.

QANTAS Airways aircraft photo gallery: