The Qantas Group has posted its third consecutive Statutory Loss Before Tax of more than $1 billion, reflecting the Delta and Omicron impacts as well as upfront costs from restarting the airline as lockdowns finally ended.
The first three quarters of the year were defined by border closures and waves of uncertainty caused by COVID variants, the fourth quarter saw the highest sustained levels of travel demand since the start of the pandemic. Overall, the Group’s flying levels for the year averaged at 33 per cent of pre-pandemic levels but finished at 68 per cent.
The reopening of borders saw a huge increase in forward travel demand, which when combined with the Group’s recovery plan, has resulted in a significant improvement to the balance sheet.
With the existential crisis posed by the pandemic now over, the Group is focused on responding to current operational challenges. Key customer measures for Qantas including contact centre wait times, cancellation rates and mishandled bag rates are trending back towards pre-COVID standards during August 2022.
There has been a significant improvement in on-time performance, which lifted from 52 per cent in July to 66 per cent for August (to date). This is expected to reach 75 per cent in September and around 80 per cent in October 2022, pending external factors such as extreme weather.
After several stop/start rebounds across FY22, domestic travel demand made a sustained recovery in the fourth quarter. Total domestic flying averaged 63 per cent of pre-COVID levels for the year and reached 103 per cent by 30 June.
Across Qantas and Jetstar, revenue intakes from leisure bookings in the fourth quarter were approximately 125 per cent of pre-COVID levels, with the Group’s dual brand strategy putting it in a unique position to meet demand from both the budget and premium parts of the market. The rebound in leisure saw the Group add more than 20 new domestic routes during the year.
Revenue intakes from business purpose travel in the fourth quarter were around 90 per cent of pre-COVID levels.
Heavy losses by the Group’s international passenger business were again significantly offset by a record performance of Qantas Freight.
While the reopening of Australia’s border in November 2021 finally saw international passenger travel return, the rebound was initially slowed by the Omicron variant and the delayed opening of key markets such as New Zealand and Indonesia.
The Group’s international capacity averaged just 17 per cent of pre-COVID levels for the year but rose to 49 per cent by 30 June. The Group has now resumed flying to 19 ports and announced eight new destinations, including Rome, Seoul and Delhi.
Globally, airlines are constrained by aircraft and labour availability in returning to pre-COVID capacity levels despite high levels of demand. While this situation is temporary it is driving strong yields across the Group’s international flying, which are offsetting the significant rise in the cost of jet fuel.
Strong revenue intakes, plus the sale of surplus land, helped the Group to lower its net debt, taking it below the optimal target range of $4.2–$5.2 billion.
Qantas was one of only six airlines to retain an investment grade credit rating through the pandemic and, during the year, had its outlook upgraded to ‘stable’ by Moody’s.
The Board has approved an on-market share buyback of up to $400 million as the benefits of the recovery materialise. This is the first return to shareholders since 2019 and follows $1.4 billion of equity raised at the start of the pandemic.
INVESTING IN OUR CUSTOMERS
In addition to investment in operational performance, the Group is delivering the following improvements to customer experience:
- Introduction of a new route – Auckland to New York – from June 2023, using the 787 Dreamliner. This will be timed to offer convenient connections to Qantas’ flights between Australia and New Zealand.
- Major improvements to several lounges starting progressively from late this year:
- Creation of a Business Lounge in Adelaide (in addition to the existing Qantas Club) and full renovation of the Chairmans Lounge.
- Complete upgrade of Qantas’ Auckland lounge.
- Port Hedland and Rockhampton lounges to be upgraded and expanded.
- And we’ve invested in extending support for our Frequent Flyers.
These improvements represent an investment of more than $400 million.
All Qantas and Jetstar aircraft based in Australia and New Zealand have returned to flying, with the exception of some Airbus A380s. Five A380s with updated interiors have now returned to service with the remaining five to follow by December 2023 once mid-life maintenance is completed.
In July, Jetstar took delivery of its first Airbus A321LR, which is 15 per cent more fuel efficient than its existing A320s. This is the first of almost 300 next-generation narrow-body aircraft arriving across the Group in the next 10 years, which will improve emissions, noise, customer experience and route economics.
Work associated with the entry into service for the Airbus A220 and A321XLR for Qantas Domestic, and the A350 for Qantas International, is underway.
Qantas International is due to receive its three remaining Boeing 787-900s by the end of FY23.
The Group has entered FY23 with its balance sheet repair process effectively complete, strong levels of travel demand and a clear path to improving its COVID-related operational challenges. Based on current forecasts, key settings and assumptions for FY23 include:
- Recovery plan to be completed in FY23.
- Group Domestic capacity reduced by a further ~10 percentage points in response to higher fuel costs and operational challenges. Some capacity may be restored once operational resilience improves.
- 1H23 – 95 per cent of pre-COVID levels
- 2H23 – 106 per cent of pre-COVID levels
- Group International capacity to increase as more A380s and 787-900s enter service and overseas borders continue to reopen.
- 1H23 – 65 per cent of pre-COVID levels
- 2H23 – 84 per cent of pre-COVID levels
For more information, refer to the Qantas News RoomOpens in a new tab or window.
Disclaimer: * These outlook statements are predicated on the Group’s current assessment of the profile of key external factors that will impact the Group’s financial performance, including economic conditions, supply chain profile and public health settings.
Disclaimer: ^ Compared with assumptions given in 24 June 2022 Market Update.