Qantas plots COVID recovery; 6,000 jobs to go

Three-year strategy: Right size, Restructure, Recapitalise

Qantas 787-9 Dreamliner | Source: Qantas

Qantas has announced a three-year, three-pronged strategy aimed at accelerating the airline’s recovery from the COVID-19 crisis. The plan will see the Qantas Group let go of at least 6,000 staff across Qantas and Jetstar and the immediate retirement of Qantas’ remaining six Boeing 747-400 workhorses, while the reintroduction of its Airbus A380 double-deck fleet (12) is uncertain.

The current focus is on three key areas: the right size workforce; a restructure to deliver ongoing cost savings and efficiencies and to recapitalise through equity raising.

Future phases of the strategy centre on increasing flights and “pursuing new opportunities – including the airline’s ambition for more non-stop international flights,” Qantas said in a statement.

“The plan is designed to account for the uncertainty associated with the crisis, preserving as many key assets and skills as the Group can reasonably carry to support the eventual recovery. COVID represents the biggest challenge ever faced by global aviation and the group’s response to the crisis is scaled accordingly.”

Qantas says the plan will target benefits in the realm of $15 billion over three years and deliver $1 billion per annum in ongoing cost savings from FY23 through productivity improvements across the group.

The jobs of some 15,000 employees already stood down will remain in limbo, particularly those linked to international operations. Redundancies are proposed for around 6,000 staff across non-operational, ground operations, cabin crew, engineering and pilots.

What will become of Qantas' First Class offering | Source: Qantas

Future Airbus A321neo and Boeing 787-9 aircraft deliveries have been deferred and up to 100 existing fleet aircraft will be grounded for up to 12 months, including most of the group’s international fleet.

The airline’s superjumbos will lay idle “for the foreseeable future”, with Qantas noting that there is “significant uncertainty as to when flying levels will support its 12 Airbus A380s”.

Qantas Group CEO Alan Joyce has agreed to ‘steer the ship’ through the turmoil for a further three years, at least until the end of the 2023 financial year.

He said the Group entered the crisis in a better position than most airlines.

“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,” Joyce remarked.

“We have to position ourselves for several years when revenue will be much lower. And that means becoming a smaller airline in the short term”.

Alan Joyce, Qantas Group CEO on board Research Flight 2 operated by a Boeing 787-9 Dreamliner, from London to Sydney.

“Most airlines will have to restructure in order to survive, which also means they’ll come through this leaner and more competitive. For all these reasons, we have to take action now”.

Joyce is however optimistic for the future, saying that pre-COVID-19 about two-thirds of the group’s business earnings came from the domestic market, “which is likely to recover fastest – particularly as state borders prepare to open”.

He said Qantas also has “big ambitions” for long-haul international flights, including the ‘Project Sunrise’ ultra-long-haul routes linking Australian East Coast capital cities with New York and London.

On the equity front, the Qantas Group will seek to raise up to $1.9 billion comprising a fully underwritten institutional placement to raise approximately $1,360 million and a non-underwritten Share Purchase Plan for eligible existing shareholders to participate of up to $500 million.

Financially, Qantas Group expects to report a full-year result between breakeven and a small Underlying Profit Before Tax, due to its “swift action to reduce its cash burn as travel demand evaporated”. That forecast figure comes after a bumper UPBT pf $771 million in the first half of FY20.

Lead image: Qantas 787-9 Dreamliner | Source: Qantas

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