The Qantas Group has posted a substantial full-year loss as a result of the COVID crisis – but has started FY22 in a fundamentally better position to deal with uncertainty and manage its recovery compared with 12 months ago.
Total revenue loss from COVID reached $16 billion as the full-year impact of minimal international travel and multiple waves of domestic border restrictions continued to hit travel demand.
The Group’s Underlying PBT loss was $1.83 billion. The statutory loss before tax – which includes one-off costs such as redundancies and aircraft write-downs – was $2.35 billion. Underlying EBITDA was $410 million, in line with the guidance provided in May.
Periods of open domestic borders in the second half saw significant cash generation by Qantas and Jetstar, which helped the Group to reduce net debt from $6.4 billion in February 2021 down to $5.9 billion by the end of June. Throughout the year, cash flow was underpinned by a continued strong performance by Qantas Loyalty and significantly higher international yields for Qantas Freight.
As well as delivering an essential service under very challenging circumstances, the Group made significant progress towards its recovery program. Planned rightsizing is largely complete and much restructuring has been implemented. Central to these changes has been the ability to better manage costs in the face of sudden border closures. Cost benefits from the recovery program were ahead of expectations for FY21 at $650 million.
GROUP DOMESTIC
Qantas and Jetstar’s combined Underlying EBITDA from domestic flying was $304 million, falling to an Underlying EBIT loss of $669 million after non-cash depreciation and amortisation.
The Group’s domestic capacity fell as low as 19 per cent in July 2020 before steadily recovering and then peaking at 92 per cent in May 2021, until outbreaks of the Delta variant triggered a series of lockdowns.
Demand proved resilient throughout the year, with quick uptake in bookings when domestic borders re-opened. The Group has announced 46 new domestic routes since the start of the pandemic, many to regional destinations, in response to a boom in leisure travel driven largely by the closure of international borders. Corporate travel demand had recovered to around 75 per cent of pre-COVID levels in May[1] and Qantas won an additional 34 major accounts across the year. Demand from business, along with leisure travel, is expected to bounce back strongly once lockdowns end.
To better meet this demand, Jetstar is bringing in idle Airbus A320 aircraft from Asia and QantasLink accessed capacity via Alliance Airlines’ Embraer E190 aircraft. Going forward, this will help the Group exceed its pre-COVID capacity and market share as restrictions are removed.
GROUP INTERNATIONAL AND FREIGHT
Group International (including Freight) posted an Underlying EBITDA loss of $157 million, increasing to an Underlying EBIT loss of $1.0 billion after depreciation and amortisation.
Qantas and Jetstar’s international flying remained largely grounded for most of FY21 due to the continued closure of Australia’s borders. A travel bubble between Australia and New Zealand saw some flying return but ongoing outbreaks meant this corridor was heavily restricted at various stages; Qantas’ capacity reached an average of 40 per cent of pre-COVID levels during quarter four.
Since the start of the pandemic, the Group has operated almost 400 flights repatriating Australians and maintaining critical links to the Pacific and Timor-Leste on behalf of the Australian Government, as well as freight missions to key export markets, with its Airbus A330 and Boeing 787 aircraft. These flights are continuing into FY22 and, together with specific government funding for crew training and engineering support, assist with readiness for regular international travel.
Jetstar airlines in Asia, which are based in Singapore and Japan, continued to suffer from minimal travel demand and incurred losses.
Demand for air cargo capacity remained extremely strong through FY21 due to a surge in online shopping in the Australian market and the belly space lost due to the cancellation of most international passenger flights. Qantas Freight was able to capitalise on this demand, delivering a record profit that significantly offset the costs of the Group’s grounded international operations.
CEO COMMENTS
Qantas Group CEO Alan Joyce said: “This loss shows the impact that a full year of closed international borders and more than 330 days of domestic travel restrictions had on the national carrier. The trading conditions have frankly been diabolical.
“It comes on top of the significant loss we reported last year and the travel restrictions we’ve seen in the past few months. By the end of this calendar year, it’s likely COVID will cost us more than $20 billion in revenue.
“We’ve had to make a lot of big and difficult structural changes to deal with this crisis, and that phase is mostly behind us. As a result, we’re geared to recover quickly, in line with a national vaccine rollout that is speeding up.
“Things remain tough, especially for thousands of our people waiting to return to their jobs when borders open and hopefully stay open. Our focus is getting them back to work as soon as possible, which is why we were ramping up our flying and adding new destinations before the most recent lockdowns.
“Despite the uncertainty that’s still in front of us, we’re in a far better position to manage it than this time last year. We’re able to move quickly when borders open and close. We’re a leaner and more efficient organisation. And our requirement for all employees to be vaccinated will create a safer environment for our people and customers.
“When Australia reaches those critical vaccination targets later this year and the likelihood of future lockdowns and border closures reduces, we expect to see a surge in domestic travel demand and a gradual return of international travel.
“I’d like to specifically recognise everyone across this company, for dealing with a huge amount of upheaval due to this crisis and showing enormous commitment and professionalism in the process. Our people maintained an absolute focus on safety and on serving our customers, who have likewise been extremely understanding as we’ve all gone through this difficult period.”
