Qantas dives to $2.7bn statutory full-year net loss, underlying profit down 91pc

After a $2.7bn loss in the 2020 financial year, the COVID-inflicted pain is not over for Qantas in its 100th year of operation.

Grounded Qantas aircraft parked at Brisbane Airport. Picture: AAP

Qantas chief Alan Joyce has warned of at least another year of pain for the airline, with no international flying expected and domestic services at the mercy of state border closures.

The grim outlook followed the airline’s $2.7bn loss for the 2020 financial year, the second worst result in Qantas’s 100-year history, as a result of aircraft writedowns and the cost of thousands of redundancies.

Mr Joyce said the COVID-19 pandemic had punched a $4bn hole in the group’s revenue and wiped $1.2bn off underlying profit, in a devastating second half.

Up until February, Qantas had been on track for an annual profit in excess of $1bn, following a $771m underlying profit for the first half.

“This is not a standard set of results for the Qantas Group,” Mr Joyce said on Thursday.

“It’s been shaped by the extraordinary events that have made for the worst trading conditions in our 100-year history.”

Although an underlying before-tax profit of $124m softened the blow of the headline result, Mr Joyce said the “sad reality of the pandemic” was an airline with much fewer employees.

“Hard decisions in the current climate are largely about survival and also about eventually being able to grow again,” he said.

He indicated that job losses could run to an even larger number than the 6000 previously flagged and confirmed yesterday, and said 4000 would have left the airline by the end of September. At the same time 20,000 staff remain stood down.

“People through no fault of their position or the company’s position have to leave this organisation, great people,” he said in an emotional tribute.

“But what I’ve seen, which has given me hope, is how well regarded Qantas and Jetstar people are, and that’s great for them.”

He praised the federal government’s support throughout the crisis, with Qantas receiving $515m in subsidies, including $267m in JobKeeper support for employees that have been stood down.

And he revealed he had written to state premiers seeking industry support because it “should not just be a burden on the federal government”.

“In a lot of cases the state governments are making these decisions (that hurt the aviation industry),” said Mr Joyce, who again called for a clear set of rules for border closures.

“I’ve asked for industry support across the board so that we’re there when the borders open up.”

Domestic flights remained at 20 per cent of pre-COVID capacity due to state border closures and Mr Joyce reiterated his belief that international flying would not resume in any significant way before July next year.

For markets like the US that had been ravaged by the pandemic, it could be even longer until flights were reinstated, which would mean a considerable hole in the Qantas balance sheet, he said.

“We won’t have international (services) for this financial year, and international would normally generate $8bn in revenue, so there’s a minimum of an $8bn hit in revenue, and we’ll have assets that will depreciate with no revenue coming in to cover it,” he said.

“2021 is going to be another bad year because of the likelihood international is not going to be reopened.”

So much financial pain

Despite so much financial pain, Mr Joyce said with $4.5bn in available liquidity and a cash burn of about $40m a week, Qantas had the “longest runway of any airline group out there”.

“It could be a while before a vaccine comes out and we’re making sure we’re strong enough not only to survive this but to take advantage of opportunities that will come when this is over,” he said. “Qantas is in a very good position domestically. We think we’ll be in a very good position internationally and we have assets like our loyalty program and freight business which are performing really well today.”

Indeed Qantas Loyalty proved the star of the airline’s stable with a mere 9 per cent fall in its earnings before interest and tax to $341m.

Alan Joyce: “It will be a question of survival for many.” Picture: Russell Shakespeare

The decline was attributed to lower earnings from travel-related products and a softening in spending on credit cards, but frequent flyer membership still grew 4 per cent.

A strong performance by Qantas Domestic in the first half of the year helped offset the 50 per cent drop in revenue in the second half, with pre-tax earnings of $173m, down from $778m in 2019.

The Jetstar Group sank $26m into the red due to the impact of COVID on the Asian arm of the airline, while Qantas International suffered an 83 per cent drop in earnings to $56m.

Moody’s vice-president Ian Chitterer said the results were broadly in line with expectations.

“Qantas has prioritised balance-sheet strength and liquidity for a number of years, despite record earnings and the coronavirus outbreak has shown the benefit of this prudence,” Mr Chitterer said.

“In addition, Qantas management has a strong track record in transforming the business.”

Citi Research analyst Jakob Cakarnis said the underlying profit before tax of $124m was ahead of expectations but acknowledged the uncertain outlook for the group.

The Transport Workers Union said the $2.7bn statutory loss highlighted the need for urgent federal government action to “save the aviation industry”.

“The shocking Qantas losses are an indication of just how sick our industry is,” said TWU national secretary Michael Kaine.

Qantas shares closed steady at $3.76.