Qantas has published its latest group market update, with CEO Alan Joyce stating that “the numbers show we’re slowly turning the corner – but we still have a long way to go”.
Total revenue loss since the start of the Covid-19 pandemic is projected to reach A$16 billion by the end of this financial year, but the group said that “Based on current trading conditions the Group expects to be statutory free cash flow positive for the second half of FY21”.
Qantas said that domestic travel demand will play a key role in the group’s recovery, with domestic corporate travel now at 75 per cent of pre-Covid levels (up from 65 per cent in April), and domestic flying “expected to almost double between the first and second half of this financial year”.
The carrier also said that “Leisure demand is growing strongly, with deferred international holidays converting into multiple domestic trips” – this has led the group to forecast that it Qantas and Jetstar carriers will average 107 and 120 per cent of their pre-Covid domestic capacity in FY22.
The two group airlines have brought all domestic aircraft back into service, and Jetstar is operating five B787s for domestic use, as well as six A320s on loan from Jetstar Japan.
However, as Business Traveller reported last week, the group confirmed it has “revised its expectations for the return of a significant level of international flying from end-October 2021 to late December 2021 (except Trans Tasman)”.
Qantas said that the new date “is in line with the Australian Government’s revised timeline for effective completion of the national Covid-19 vaccination programme, and the Qantas Group is optimistic that the opportunities for additional travel bubbles with other countries will increase significantly from that point”.
The group also said that travel demand between Australia and New Zealand “is rebuilding steadily”, following the launch of two-way quarantine-free travel last month, although “Several pauses and additional restrictions from both countries in response to small outbreaks have impacted confidence, leading to capacity being limited to around 60 per cent of pre-Covid levels”.
Commenting on the update Qantas Group CEO Alan Joyce said:
“We have a long way still to go in this recovery, but it does feel like we’re slowly starting to turn the corner.
“It’s great to see so many of our people now back at work and the majority of our fleet back in the air. Our recovery strategy of targeting cash-positive flying rather than pre-Covid margins is helping increase activity levels and repair our balance sheet.
“The fact we’re making inroads to the debt we needed to get through this crisis shows the business is now on a more sustainable footing. The main driver is the rebound of domestic travel, which now looks like it will be bigger than it was pre-Covid, at least until international borders re-open.
“Jetstar was profitable on an underlying EBIT basis in April, which was largely due to strong leisure demand over Easter and school holidays, but it’s an important sign that we’re on the right path.
“Managing costs remains a critical part of our recovery, especially given the revenue we’ve lost and the intensely competitive market we’re in.
“We’ve adjusted our expectations for when international borders will start opening based on the government’s new timeline, but our fundamental assumption remains the same – that once the national vaccine rollout is effectively complete, Australia can and should open up. That’s why we have aligned the date for international flights restarting in earnest with a successful vaccination program.
“No one wants to lose the tremendous success we’ve had at managing Covid but rolling out the vaccine totally changes the equation. The risk then flips to Australia being left behind when countries like the US and UK are getting back to normal.
“Australia has to put the same intensity into the vaccine rollout as we’ve put on lockdowns and restrictions, because only then will we have the confidence to open up.”