Qantas posts $2.35bn annual loss as the airline looks to resume international flights in December

Qantas is hoping to restart international flights in December after posting a $2.35bn annual loss due to Covid-19.

Qantas is banking on the resumption of international flights and a restriction-free domestic market to help lift the airline out of the red after another huge annual loss.

The $2.35bn statutory loss before tax came after a $2.7bn loss in 2020, and was blamed on “diabolical” trading conditions in the last 12-months.

With a mere 30-days of the year free of domestic travel restrictions and no commercial international flights, Qantas CEO Alan Joyce said the airline had missed out on $16bn of revenue.

“By the end of this calendar year, it’s likely Covid will cost us more than $20bn in revenue,” said Mr Joyce.

Despite the grim figures, Qantas was able to reduce its total debt from a high of $6.4bn in February to $5.9bn by the end of June.

Large-scale restructuring delivered $650 million in savings, at considerable cost to workers with 9400 jobs now gone, or a third of the pre-pandemic workforce

Federal government assistance to the airline totalled $1bn, with $600 million of wage support paid to employees and $400 million funding 320 international repatriation flights, and hundreds of freight-only services.

Qantas Loyalty continued to excel generating $1bn in sales, and adding 200,000 more members to the juggernaut frequent flyer program.

Mr Joyce said the pain being experienced now would lay the foundations for a return to profit, as the airline returned to pre-Covid levels of flying with a significantly lower cost base.

“That will produce good returns for the business which will allow us to pay back the debt we’ve borrowed and return some of the money shareholders have given us,” he said.

“It will allow us to start recruiting and growing again which we think will be good for the country and our people.”

Central to the airline’s recovery was the reopening of domestic borders, expected by December 1, shortly followed by Qantas's planned resumption of commercial international flights.

Providing vaccination rates reached 80 per cent and Australia did open up, Mr Joyce said Qantas would operate services to the UK, the US, Canada, Singapore, Japan, Fiji and New Zealand by Christmas.

“The nature of Covid means we’ve had to change this plan a few times and we can’t rule out that we may have to move the dates again,” he said.

“But the current pace of the vaccine rollout means all Australian states are on track to reach the 80 per cent target by December which is the target to carefully open up to some parts of the world.”

Qantas CEO Alan Joyce says it’s been a diabolical year.

He said the deal breaker for Qantas would be a continuation of mandatory hotel quarantine requirements for fully vaccinated travellers entering Australia.

“If it’s still 14-days of hotel quarantine demand levels will be very low and this (flight) schedule won’t be feasible,” said Mr Joyce.

“A shorter period with additional testing and the option to isolate at home will see a lot more people travel and that gives us confidence this level of operation could work.”

Flights to Hong Kong were scheduled for February 2022, followed by services to Bali, Jakarta, Ho Chi Minh City, Bangkok, Phuket, Manila and Johannesburg in April.

Qantas confirmed all international travellers would need to be fully vaccinated, and carry a digital health pass containing their jab and Covid test status.

The optimistic outlook buoyed the Qantas share price, which cracked the $5 mark for the first time in three months, closing up 17 cents at $5.03.

Moody’s investors service vice president Ian Chitterer said the airline was on track to emerge from the pandemic in a strong position and with an increased domestic market share.

“Our primary focus therefore remains on Qantas’ substantial level of liquidity ($3.8bn), which leaves it very well positioned given the current outlook for the resumption of travel,” said Mr Chitterer.

Citi analyst Samuel Seow expressed surprise at the level of debt Qantas achieved, saying they expected the airline to be much deeper in the red given the impact of lockdowns.

“We were positively surprised by the strength in the forecast balance sheet and international capacity assumption,” said Mr Seow.

“Additionally we think commentary around maintaining 70 per cent (domestic) market share … indicate the company may emerge in a better shape.”

The Australian and International Pilots Association welcomed the greater certainty around overseas flights, that would see hundreds of members stood up again.

AIPA president Murry Butt said although there was still much uncertainty, it appeared there was at last an end in sight to the crisis.

“We’re certainly feeling more confident now that they’re relating a plan to a known quantity which is the amount of people who are vaccinated, rather than something non-specific like ‘when demand returns’,” said Captain Butt.

“For A380 pilots, (a return to flying) is still nearly 11-months away but it’s positive news at a time when a lot of people are stuck in their homes.”

Air New Zealand also delivered its full year results on Thursday, posting a $393 million loss, down from $601 million in 2020.

Chairman Dame Therese Walsh said the loss reflected the reality of a year in which the airline was unable to fly two-thirds of its passenger network.

“The return of a strong domestic business and growth in the cargo services that underpin our key export markets was a reminder of the airline’s crucial role in New Zealand’s infrastructure,” said Dame Therese.