Qantas raises another $500m to boost reserves, cover debt

Qantas has raised another $500m to boost its cash reserves and cover a $400m debt due next year.

Qantas airport baggage handlers at work. The airline is planning to outsource the work to a “specialist company” to save $100m a year. Picture: Supplied.

Qantas has raised more cash to help it see through the COVID-19 crisis, confirming a ten-year $500m unsecured bond issue as it navigates the pandemic.

The funds would strengthen short-term liquidity to $5bn, and then be used to pay $400m in bonds due to expire next June.

A statement to the ASX said the coupon for the new bond, which was oversubscribed, was 5.25 per cent, significantly lower than the 7.5 per cent funding it replaced.

“Qantas is one of the few airlines with continued access to long-term, unsecured bond markets,” the statement said.

“Access to this and other funding sources in recent months during the COVID-19 crisis, reflects the national carrier’s strong overall financial position, the importance of aviation to its home market of Australia and its clear recovery plan.”

The airline group recently reported an annual loss of $2.7bn before tax, and expects another significant loss in the 2021 financial year.

Confirmation of the bond issue came as the Transport Workers Union sent a list of demands to Qantas over its plans to outsource ground handling operations to save $100m a year.

The move will affect just over 2400 Qantas and Jetstar workers at 11 airports including Sydney, Melbourne, Brisbane, Avalon and Cairns.

As part of the process to contract out the work, Qantas employees were invited to submit their own “in-house bid”, competing with multinational firms like Swissport and dnata.

In a letter to Qantas on Tuesday, TWU assistant secretary Nick McIntosh sought a raft of commitments, including an assurance workers preparing a bid would get access to a professional consultant and time-off for their efforts.

“We are proceeding under the assumption that, as part of its commitment to assist an in-house bid, Qantas will fund this consultant as has been the custom and practice in recent years during past in-house bids,” Mr McIntosh wrote.

“Further we assume that union delegates and employees will be provided with all the paid time off that is need to properly prepare the in-house bid.”

Material sent out to employees following last week’s announcement stated that union representatives wishing to prepare a bid would be provided with “reasonable time off”.

“We will also provide reasonable access to management and relevant data,” said the fact sheet.

Mr McIntosh also sought an assurance that the winning bidder would have to commit to offering existing Qantas workers’ jobs under the same terms and conditions as they were currently employed.

“Further Qantas, as the top of the supply chain, must have appropriate oversight of the work, including adequate auditing arrangements of all facets of the arrangement,” he said.

Announcing the decision last week, Qantas Domestic chief executive Andrew David said specialist firms which carried out ground handling operations for multiple airlines could do the work for about 40 per cent less than what the group currently paid.

He said the contracted firms were responsible for the maintenance and replacement of ground service equipment which represented a significant saving.

The 2400 workers facing job losses as a result of the outsourcing, were in addition to 6000 employees identified as surplus to requirements in a post-COVID operating environment.

Qantas expected to farewell 4000 of those workers by the end of September.

About 20,000 employees remained stood down due to the lack of flying occurring as a result of the pandemic and border closures.

Qantas shares closed down 1.3 per cent on Tuesday at $3.89.