Amid the gloom surrounding aviation, one airline boss hit an upbeat tone today. Alan Joyce, CEO at Qantas, is resolutely confident about his airline’s chances and future. According to Mr Joyce, the strong airlines will survive and go on to prosper. Naturally enough, Mr Joyce thinks Qantas is leading the pack.
Speaking at the Centre for Asia Pacific Aviation Summit on Wednesday, Alan Joyce said Qantas was in the box seat when it resumed international flying. On the back of raising an additional US$367 million yesterday via a 10-year unsecured bond issue, Qantas has access to around US$2.95 billion in cash and was good for the next three years of challenging conditions.
“We want to make sure we have enough money to restructure the business,” said Mr Joyce today.
You make your own luck, says Qantas CEO
The CEO is an old hand when it comes to running airlines. He says Qantas will survive and prosper because the airline diversified its strategy and did the hard yards before the travel downturn.
“You make your own luck, you make your own competitive advantage, you put your business into the right position, and Qantas, over a long period of time, has done that.”
Mr Joyce doesn’t think flying will get back to normal for another three years. He pointed to Qantas putting their fleet of A380s into long term parking in California as evidence of that. But he says Qantas can trade through present difficulties and when international travel rebounds, they’ll have the right aircraft mix and reduced cost base.
“We also got rid of the 747s, and retired them early. So the fleet we now have internationally will be the 787s, which I think will be the right aircraft coming out of COVID because it will give us a very broad network with a good mix of premium cabins in it,” Mr Joyce said.
The Qantas A380s will be back and flying profitably
He spoke of the A380s writedowns earlier this year. Those write-downs helped blow a big hole in Qantas’ financial performance over the 2019/20 year. It cost over US$1.3 billion, but Mr Joyce reckons Qantas will reap the benefits down the track.
“In three years time, when the market recovers, which we think it will, and those aircraft generate cash, they basically will be profitable aircraft.
“When the time’s right, I think the A380s which are fully depreciated aircraft, get them back in the air, …. they basically will be profitable aircraft.
“We’re keeping that option open, and I believe we will put those aircraft (the A380s) back into the air.”
The case for Project Sunrise will be better than ever
Noting that Qantas was just weeks away from ordering the aircraft for Project Sunrise, Mr Joyce acknowledges he dodged a bullet there. But he thinks the business case will be even stronger for Project Sunrise post-COVID.
“We are managing through the crisis. We will at the appropriate time, when we fix our balance sheet, we’ll order those aircraft.
“I’m very keen, and not many people will be ordering aircraft when Qantas is, and there will be opportunities for us to do even better deals than we did on the past on aircraft replacements.
“We think there will be an even bigger business case for post COVID-19, so this allows us to take those opportunities.”
Qantas will come back stronger than before
Mr Joyce doesn’t think it will be smooth sailing. He says the current environment is very uncertain and liable to change quickly. But overall, he’s optimistic. That optimism isn’t based on closing your eyes and praying. Rather, Mr Joyce says Qantas has the business fundamentals in place and the liquidity to get through this. On the other side, the airline will come out stronger than ever.
“I think we’ll do well in that (post-COVID) environment. The carriers that have a strategic advantage and the ability to fly very long distances, I think that will be an advantage. So I have a lot of optimism that Qantas can get through this.”
