‘Little Aussie battler’ Qantas books a $1.3bn half year loss

Qantas boss Alan Joyce has vowed the ‘little Aussie battler’ airline will continue its market domination despite a fourth consecutive half year loss.

Qantas, led by Alan Joyce, has posted a $1.27bn loss for the six months to December. Picture: John Gass/NCA NewsWire

Two major Covid-19 outbreaks have pushed Qantas to a massive $1.28bn loss for the six months to December 31 – but chief executive Alan Joyce said the airline will continue to dominate despite growing competition.

In a result Mr Joyce described as “frustrating”, Qantas posted an underlying half year loss of $1.28bn, worse than the $1bn loss posted in the previous corresponding period.

The Delta and Omicron outbreaks in the latter part of 2021 were blamed for pushing the airline group into the red for the fourth consecutive half year, and delaying the travel recovery a further six months.

Mr Joyce said Qantas and low fares subsidiary Jetstar were at 92 per cent of pre-pandemic capacity in June, only to have Delta strike, plunging the majority of Australians into lockdown.

Flying fell to a mere 18 per cent of 2019 levels and then just as demand was rebuilding in the lead up to Christmas, Omicron emerged delivering another king hit to consumer confidence.

“In all honesty, it’s been a real rollercoaster,” Mr Joyce said.

He revealed Omicron had put a $650m dent in second half earnings, and Western Australia’s delayed border reopening amounted to a $60m blow.

“We’re always going to have worry about this. I think the West Australian government needs to make sure it brings confidence back in,” he said.

“When they commit to something, they should stick to it and I think people once bitten will be twice shy on that.”

Now that most states and territories had reopened, and other Covid-19 restrictions like check-ins and masks were being wound back, Mr Joyce said he was confident demand – particularly for corporate travel – would return.

Corporate travel is at 33 per cent of pre-pandemic capacity, while leisure travel was already back to 100 per cent. “The big thing that will be a catalyst (to corporate travel) is the removal of masks in the office and getting people back to the office which happens from this Friday in the two biggest states,” he said.

As travel increased, Qantas was aware it would face intense under scrutiny from the Australian Competition and Consumer Commission, as newcomer Bonza took flight, Virgin Australia continued to rebuild and Rex expanded into more capital cities.

Mr Joyce said Qantas would fiercely protect its market share, and took aim at his rivals’ foreign owners in Bain Capital and 777 Partners. “It’s great for the Australian travelling public that you’ve got these big US private equity companies setting up airlines here, 100 per cent owned by them and you’ve got the Singaporeans owning an airline like Rex,” said Mr Joyce.

“By the way, Qantas has never been more Australian than it is today. We’re 79 per cent Australian owned which is the biggest percentage we’ve had since we were privatised (in 1993). So we’re the little Aussie battler competing against these big private equity companies around the globe and we’ll do pretty well with that.”

Under the Qantas Sale Act, foreign ownership in the airline is capped at 49 per cent and reached a high of 48 per cent in 2017.

Throughout the pandemic those levels fell as all airline stocks fell out of favour, particularly with large institutional investors based overseas.

Qantas’ foreign ownership levels were likely to steadily increase as the recovery of global airline stocks strengthened but could never exceed 49 per cent.

In the international travel space, Qantas was starting to see a ramp up in flying on the back of Monday’s full border reopening, with capacity forecast to reach 70 per cent of 2019 levels in July.

“Qantas is outperforming all of its competitors,” said Mr Joyce.

“For example on Singapore, in the last period Qantas had 60 per cent seat factors and Jetstar 50 per cent, whereas Singapore Airlines had 30 per cent and Scoot 20 per cent. Those seat factors are still below what we want them to get to but when the government announced international visitors were allowed back in we saw a doubling of bookings immediately.”

Equities analysts reacted favourably to the results, noting the $400m reduction in net debt to $5.5bn and the expectation of further improvement by mid-year.

“We expect Qantas’s earnings and balance sheet recovery over the next 12 to 18 months to be substantial, given its strong liquidity, increasing capacity, and a lower probability of border closures,” said Moody’s Investor Service vice president Ian Chitterer.

“This supports our credit view that Qantas will emerge from the pandemic strongly positioned operationally and financially.”

Jarden Australia analyst Jacob Cakarnis said it was a “decent result” but the second half would be impacted by the $650m cost of the Omicron outbreak and $180m in inefficiencies, as a result of standing up all staff.

Citi research analyst Samuel Seow observed that investment in staff capacity was impacting top line recovery but that was merely a “timing issue”.

In recognition of the challenges and uncertainty employees have faced in the last two years including a pay freeze, Qantas announced a “reward” of 1000 shares for 20,000 workers.

Worth more than $5000 on the current share price, the new shares would be awarded to employees in August 2023, provided Qantas met key performance targets between now and then.

Executives would also have to wait until then for their reward, after bonuses were scrapped for another year.

Qantas shares closed down 5 per cent for the day at $5.08.

The airline last declared an interim of 13.5c a share fully franked in February 2020, which was paid to shareholders two months later.