Qantas reported a $2.7 billion loss due to write-down of assets including the A380 fleet, mass layoffs and other costs as part of its recovery plan.
The airline’s fiscal year has been shaped by novel coranavirus pandemic that have made for the worst trading conditions in its 100 year history.
“COVID punched a $4 billion hole in our revenue and a $1.2 billon hole in our underlying profit in what would have otherwise been another very strong result,” said Qantas Group CEO Alan Joyce.
The two biggest driving forces for the airline’s record loss are:
- A $1.4 billion write-down of assets including its A380 fleet. The airline’s double-deckers will stay in storage for years.
- More than $600 million in redundancies and other items, as part of restructuring plan.
The airline, however, posted a $124 million profit for the financial year ended 30 June 2020, down 91% compared to the same period last year.
Progress of Qantas’ Recovery Plan
Qantas announced its plan for recovery at the end of June.
Over three years, the airline expects that the recovery plan will save the airline $15 billion, which will be achieved by radical decisions like mass layoffs and ongoing stand down of the airline’s employees because of less flying, as well as fuel savings and lower maintenance costs from putting aircraft into hibernation.
Qantas has already made some progress against the core elements of the recovery plan:
- All of the airline’s Airbus A380s are now in long term storage in the US.
- Boeing 747s have been retired, six months ahead of schedule.
- The airline is progressing with reductions to its workforce.
- Sydney-based airline have also negotiated new terms with many suppliers.
Qantas had to take hard decisions in the current climate to sustain survival of its business and eventually grow again.
Australia’s flag carrier believes that it’ll be the only Australian airline that can fly long haul in the post pandemic period.
However, Qantas and its subsidiaries QantasLink and Jetstar have restructured their fleet to focus on domestic flights due to circumstances caused by the pandemic.
Commentary of Qantas CEO
Qantas CEO Alan Joyce said the second half of the fiscal year was the toughest set of conditions the national carrier had faced in its 100 years – but that it had the resilience to deal with them.
“The impact of COVID on all airlines is clear. It’s devastating and it will be a question of survival for many. What makes Qantas different is that we entered this crisis with a strong balance sheet and we moved fast to put ourselves in a good position to wait for the recovery.
“We’ve had to make some very tough decisions in the past few months to guarantee our future. At least 6,000 of our people will leave the business through no fault of their own, and thousands more will be stood down for a long time.
“Recovery will take time and it will be choppy. We’ve already had setbacks with borders opening and then closing again. But we know that travel is at the top of people’s wish lists and that demand will return as soon as restrictions lift. That means we can get more of our people back to work.
“COVID is reshaping the competitive landscape and that presents a mix of challenges and opportunities for us. Most airlines will come through this crisis a lot leaner, which means we have to reinvent how we run parts of our business to succeed in a changed market.”
Mr Joyce said the FY20 result showed how the COVID crisis had derailed what would have been a strong financial performance.
“We were on track for another profit above $1 billion when this crisis struck. The fact that we still delivered a full year underlying profit shows how quickly we adjusted when revenue collapsed.
“Qantas Loyalty’s profit was down less than 10 per cent and member satisfaction increased in the fourth quarter, which shows the strength of that business. Qantas Freight has been a major beneficiary of the shift to people shopping online and our charter flying for resources companies is strong.
“COVID will continue to have a huge impact on our business and we’re expecting a significant underlying loss in FY21.
“Looking further ahead, we’re in a good position to ride out this storm and make the most of the recovery. Our market position is set to strengthen as the only Australian airline with a full service and low fares domestic offering as well as long haul international services,” added Mr Joyce.