Qantas and Woolies: the two faces of Covid
The impact of lockdowns and Covid-19 restrictions played out in the vastly different full-year financial results unveiled by Woolworths and Qantas.
Terry McCrann
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Since the virus flew out of Wuhan and into Australia – and indeed, everywhere else – there have arguably been only two things that the politicians have unanimously and continually agreed they would let us do or not do.
They would, very generously, allow us to keep going to the supermarket.
Albeit, time and time again in Victoria, only one person once a day – and to be done before the curfew kicked in; and the same now in NSW with the added instruction not to “linger” and absolutely not make eye contact with or worse talk to anyone.
Secondly, they would not let us get on a plane to fly overseas; or indeed, month-in and month-out, even fly to another state. And if you had been silly enough to fly overseas before Covid, well, you could just stay overseas.
Well, that’s unless you were a ‘celebrity’ or some other privileged person: for so many of them it’s been a case of “be my guest” to come and go. Or indeed often, be your own guest, quarantining at home.
These two rather different realities, but residing at the same end of the authoritarian political spectrum, played out in the very different profits unveiled, coincidentally but so very instructively, Thursday from Qantas and Woolworths.
Qantas: $12bn revenue whack from – the always polite CEO Alan Joyce said – the Covid crisis. I say, from decisions made by politicians; I’m not aware of the virus infecting planes, so far its only humans. And a bottom line loss of $1.8bn.
Woolies: sales up $2.5bn; profit up by 23 per cent; and so much capital and cash jiggling in its tills that Woolies is doing a $2bn shares buyback and lifting dividend by 15 per cent.
Now, there’s quite a bit of “history’ in both lots of numbers. Unfortunately for Qantas that history is also the present and the immediate future.
The 2020-21 financial year was actually relatively better than the current one has been so far and – despite Joyce’s optimism – looks like going to be the case for some (many?) months yet.
The immediate national lockdown ended before 2020-21 got underway. The current lockdowns in Victoria and NSW started after the year ended.
So 2020-21 was ‘only’ hit by the ban on international (passenger) flights and the Victorian lockdown.
This played out in international revenue dropping 78 per cent from the last normal pre-Covid 2019 year. A record freight profit inside international very impressively “materially covered” the cash holding costs of the entire international business.
Qantas domestic revenue fell in comparison ‘only’ 55 per cent from the pre-Covid level, while Jetstar – a mix of non-flying international and domestic – was down 71 per cent.
Once again, the frequent flyer program – Qantas calls it ‘Loyalty’ and this year that tag was decidedly more accurate, as there weren’t many flyers flying at all far less ‘frequently’ – was the only segment in black ink.
As members couldn’t use their points to buy international flights – the best way to use them and also the least profitable for Qantas – they switched to using them for domestic flights and in record numbers in the Qantas Rewards store and, no surprise, Wine.
These are both the most profitable way for Qantas that points are used.
Even so, the lush profits from Loyalty started to look a little less lush through 2020-21; and Qantas could well be building up a cost surge when and if people can use them internationally and rush to do so.
Yes, Woolies had a walk-up year thanks to the pollies and their lockdowns and travel bans. But it also had to handle both regular and irregular cost pressures.
Bottom line, it managed to lift both its group EBIT margin to 5c in the sales dollar and that of food to 5.5c
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