Qantas has posted a fourth consecutive half-yearly statutory loss before tax of US$930 million (AU$1.28 billion) for the six months to December 31. The Sydney-based airline attributes the loss to the impact of delta lockdowns and emergence of the omicron strain that contributed to widespread domestic lockdowns and continued international travel restrictions.
Lockdowns, travel restrictions & omicron hamper Qantas’ financial performance
While the airline has US$3.11 billion available in total liquidity and net debt declined to US$3.98 billion (within the target range), severely depressed market conditions and ramp-up costs saw the Qantas Group record an underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of US$177.1 million.
The underlying earnings before interest and taxes (EBIT) loss was US$820 million, reflecting non-cash depreciation and amortization. Revenue losses since the start of the pandemic grew to more than US$15.9 billion.
“Most of Australia was in lockdown for several months of the first half, so the loss we’ve announced today isn’t surprising, but it is frustrating,” said Qantas Group CEO Alan Joyce on Thursday morning (local time). “We saw a sharp rebound in travel demand when borders started opening in November and December, only to be hit by the omicron wave and all the uncertainty that came with it.
“Despite all the uncertainty, we finished the first half with net debt back inside our target range and with strong liquidity, meaning we can start to look further ahead at strategic decisions on fleet, network and growth opportunities.”
Qantas has resumed flying a limited number of international flights. Photo: Airbus
Qantas freight and loyalty programs punch above their weight
Qantas says delta-related lockdowns meant that domestic travel demand was heavily subdued for most of the last half of 2021, with the Group only flying 42% of its pre-COVID capacity. While there was a positive demand spike in November and December, the traditional Southern Hemisphere summer peak was below expectations due to omicron-related uncertainty. Careful management of capacity meant that 92% of the Group’s domestic flying in the six-month period was cash positive.
Qantas was able to ramp-up quickly to take advantage of accelerated international border openings in November, with high levels of pent-up demand captured on new services to Delhi and the return of services to London, Los Angeles and Singapore.
Despite these bright spots, international flying remained significantly impacted by the continued closure of Australia’s international border to tourists throughout the half, and the reintroduction of border restrictions by other countries as they managed omicron.
Standout performers within the Qantas Group in the last six months of 2021 were the freight and loyalty businesses. A record performance by freight helped offset cash losses from Qantas international passenger services as they rebooted after a long suspension period. Dedicated freight flights also provided a hedge during the pandemic due to a lack of cargo capacity on passenger aircraft. The Qantas Group has recently announced the conversion of two A330 passenger aircraft into freighters to support freight demand as well as taking delivery of its third A321 freighter.
Qantas Loyalty also remained a strong performer with continued earnings growth. The number of Qantas Frequent Flyer members continued to grow (up 150,000 to 13.8 million) as did the number of points earned on the ground.
“We’ve expanded our program partners, which has helped drive earnings,” said Mr Joyce. “That’s kept our members highly engaged, which is the bedrock for the program’s continued success.”
Qantas CEO Alan Joyce (pictured) announced the half-yearly loss in Sydney on Thursday morning. Photo: Getty Images
Fleet renewal & Project Sunrise plans continue
The Qantas boss also used his speech on Thursday to provide some clarity on fleet plans. He said a decision on domestic fleet renewal is expected mid-year and work on Project Sunrise has restarted.
“We expect to finalize the order for our domestic fleet renewal with Airbus – a decade long program that we call Project Winton – by mid-calendar year. These aircraft will be the backbone of Qantas Domestic, will deliver a big reduction in fuel consumption, and represent a huge part of our future,” Mr Joyce said.
“Work has also resumed on Project Sunrise. Our latest customer research shows the demand for direct long-haul flights is even stronger than it was pre-COVID, so our focus on delivering non-stop services from Sydney and Melbourne to New York and London remains.”
Despite the hefty half-yearly loss, Alan Joyce remains upbeat about the future of Qantas. He says the road to recovery is long and Australia needs to learn to live with COVID, but adds the country and his airline is heading in the right direction.
“In the past month alone, I’ve traveled to Brisbane, Hobart, Melbourne and Darwin, and the airports are getting busier and busier. Our forward bookings in the past few months have been very encouraging and keep trending upwards. And the Qantas Group is in a strong position to keep serving Australia well into the future.”
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