MIAMI – This morning, The Qantas Group announced a three-year plan to aid in its recovery from the COVID-19 crisis to create a structure for profitability, shareholder value, and job preservation.
Their press release says the initial plan is to rightsize the workforce, fleet and other costs according to projections of demand. They also want to restructure to deliver ongoing cost savings across their operations. Further, they’re looking to raise funds to strengthen the group’s financial resilience for recovery.
Up to 21,000 Jobs Are On The Line
However, since the group needs to account for the uncertainty that lies ahead and focus on long-term gains, at least 6000 jobs across Jetstar Airways (JQ) and Qantas Airways (QF) will be lost. 15,000 jobs will be ‘stood down’, particularly jobs associated with international operations.
Through the cuts, and reduction in fuel consumption, The Qantas Group hopes to save US$15bn over three years.
Qantas’s CEO, Alan Joyce, sympathized with employees who were put out of work: “Adapting to this new reality means some very painful decisions. The job losses today are confronting. So is the fact thousands more of our people on stand down will face a long interruption to their airline careers until this work returns.”
However, he also remains optimistic about the action his airline is taking: “The Qantas Group entered the crisis in a better position than most airlines and we have some of the best prospects for recovery, especially in the domestic market, but it will take years before international flying returns to what it was.”
Slashes to the Fleet
Qantas announced it will be retiring its remaining six Boeing 747-400 aircraft six months ahead of schedule. It will also be grounding up to 100 aircraft for at least 12 months, including most of the international fleet. Leased aircraft will likely be returned when due.
The deliveries of remaining Airbus A321neo and Boeing 787-9 aircraft have been deferred to meet the group’s requirements. A huge blow to both manufacturers. The A380 will also be grounded for the foreseeable future due to lack of demand.
Resulting Financial Position
After reporting a strong underlying profit before tax of US$771m in the first half of FY20, Qantas Group saw a significant reduction in revenue during the second half.
However, since adequate action was taken to reduce cash burn as travel demand depleted, they expect to report a result between breaking even and potentially having a small underlying profit before taxes.
It is reported that Qantas Freight performed strongly, driven by major increases in eCommerce that are also expected to continue.
Available liquidity and the future for employees
Following the completion of the planning, Qantas Group’s available liquidity is expected to be US$4.6bn, including a US$1bn undrawn facility. As of May 31, 2020, pro forma debt is expected to be at US$4.7bn with no major debt maturities until June 2021 and no financial covenants on its debt.
In their press release, QF was optimistic that 8,000 employees will return to work by the end of July, and a further 7,000 by the end of the year. As international flights resume, the company could see 21,000 active employees by June 2022.
This gives workers something to look forward to, as grey skies don’t last forever.