Qantas says it expects no material international travel until July and perhaps beyond but says that it has seen increasing corporate demand for its domestic services.
The airline said that despite being close to breaking even on an underlying earnings basis thanks to deep cost cutting, it expects to make a substantial statutory loss for the 2021 financial year (ending 30 June 2021). It believed it would be free cash flow positive excluding redundancies in the second half of the financial year.
Qantas’ international operations remain largely grounded, with the exceptions being ongoing repatriation services from the UK, South Africa and India, and a limited number of flights to New Zealand under a one-way bubble arrangement.
Domestically, the airline is doing well. It said domestic capacity in December quarter would be 68 per cent of pre-Covid levels and that this would rise to 80 per cent for the third quarter. The airline said that changes in the broader domestic market – a reference to Virgin Australia’s shift to a low-cost carrier model – have seen a number of large corporate customers move to Qantas this year, a trend that has accelerated in the past few months, it said.
Qantas also says it has finalised new multi-year agreements with ten of the top 12 agencies “to reduce its selling costs while also creating better selling opportunities for these important partners”.
The carrier said it expected to deliver A$600 million (£331 million) in structural cost benefits in this financial year. A plan to outsource its ground handling would result in a further 2,500 redundancies and A$100 million (£55 million) in savings.
Qantas group CEO Alan Joyce said: “Bringing domestic capacity back to almost 70 per cent in December is very positive compared to where we’ve been, and so is seeing more of our people back at work. But overall the group is still a long way off anything approaching normal.”
He added: “International travel is likely to be at a virtual standstill until at least July next year and it will take years to fully recover, which means we’re carrying the overhead for billions of dollars worth of aircraft in the meantime. We’re also facing a revenue drop of at least A$11 billion this financial year alone compared to pre-Covid.”
Joyce said recently that international travellers would require proof of vaccination against Covid once services did restart, a decision which has caused controversy.