Qantas Group market update - increasing resilience for long-term recovery

The Qantas Group today announces that it has secured a further AU$550 million in funding against three of its wholly-owned Boeing 787-9 aircraft. This follows the AU$1.05 billion raised in March against seven 787-9s. 

Net debt is now within the middle of the target range, at AU$5.8 billion. The Group has no financial covenants on any existing or new debt facilities and no significant debt maturities until June 2021. 

The Group has sufficient liquidity to respond to a range of recovery scenarios, including one where the current trading conditions persist until at least December 2021. The Group currently has AU$2.7 billion in unencumbered aircraft assets and can raise funds against these if required. 

At the start of the crisis, the Group acted quickly to wind down cash burn through employee stand downs, a pause on virtually all capital and operating expenditure, and revised agreements with key suppliers. 

As a result, and based on current conditions, the Group expects to reach a net cash burn rate of AU$40 million per week by the end of June 2020. 

As at close of business 4 May 2020, total short-term liquidity stands at AU$3.5 billion, including a AU$1 billion undrawn facility. 

The Qantas Group is currently operating around 5 per cent of its pre-crisis Australian domestic passenger network and around 1 per cent of its international network on an Available Seat Kilometre basis. On a flying hours basis – which includes charters for the resources sector at 75 per cent of pre-Coronavirus levels and passenger aircraft flying as freighters – the Group is operating 13 per cent of its Australian domestic network and 6 per cent of international.

Under the circumstances, Qantas and Jetstar will now extend existing Australian domestic and Trans-Tasman flight cancellations beyond end-May through to the end of June 2020. International flight cancellations will be extended through to end-July 2020.

The initial easing of Australian government restrictions suggests some Australian domestic travel may start to return before the end of July – though initial demand levels are hard to predict. The Group will continue to monitor the situation and can increase capacity with a minimum lead time of around one week.

Qantas and Jetstar customers with bookings made through Travel Agents or third-party websites and are impacted by the cancellations for June and July, will need to contact them directly.

Qantas Loyalty  continues to perform well, with external billings flowing from Frequent Flyer.

Before the Coronavirus crisis, two-thirds of all Qantas Points were earned on the ground, meaning that the opportunities for engaging the programs’ 13 million members remain high despite the pause in flying activity. A recent survey of members showed 85 per cent were planning to travel as soon as conditions allowed – a sentiment reflected in the fact most are saving their points for a redemption flight sometime in the future.

Qantas Freight  has seen high volumes and achieved strong revenue for March and April. Its 12 dedicated freighters are heavily utilised and the airline’s passenger A330 and B787 aircraft have also been used to move cargo on services to Shanghai, Hong Kong and Tokyo, facilitating export of Australian produce and import of medical supplies.