Qantas points to improving outlook after Omicron delays recovery plans

[SYDNEY] The reopening of Australia's internal and external borders has significantly boosted the outlook for Qantas Airways, although the Omicron Covid-19 outbreak has set back its business recovery plans by around six months.

Qantas on Thursday posted a A$1.28 billion (S$1.25 billion) first-half underlying loss before tax in the six months ended Dec 31, steeper than the A$1.03 billion loss a year earlier.

The airline also flagged a A$650 million earnings hit from Omicron in the second half.

Preparing for a surge in demand as the earlier Delta variant wave receded, Qantas had by early December recalled about 11,000 staff who had been idled without pay during the pandemic.

But the surprise arrival of the Omicron variant, which pushed Australian Covid-19 cases to record levels, dented demand and forced the airline to cut domestic and international capacity plans for the current quarter by around one third.

"The impact of Omicron has pushed everything out by around six months from where we thought we would be," chief executive Alan Joyce told reporters, adding the earlier-than-needed ramp up of staff and equipment would add A$180 million to costs in the second half.

Qantas is also facing inflationary pressures from suppliers and rising fuel prices, though 90 per cent of its fuel cost is hedged in the second half and its cost-cutting programme is on track, chief financial officer Vanessa Hudson said.

Qantas shares were around 2 per cent lower in early trading, in line with the broader market, with broker Jefferies saying the result was solid given the difficult period.

The airline said it would run 68 per cent of its pre-Covid domestic capacity in the third quarter, rising to 90 per cent to 100 per cent in the fourth quarter. International capacity would be around 22 pre cent of pre-Covid levels in the third quarter, doubling to 44 per cent in the fourth quarter.

JET ORDERS

Australia on Monday opened its international border to fully vaccinated travellers from all countries, the last step in a staged border opening that began in November. Internally, Western Australia will be the final state to open on March 3.

"Where we are now, I think we are very optimistic," Joyce said as the airline pointed to solid bookings for the upcoming Easter holiday period. "The outlook is looking a lot stronger."

Neighbouring New Zealand is opening more slowly and Air New Zealand forecast on Thursday it would post its biggest annual loss since 2001.

Joyce said Qantas remained on track to finalise an order for 40 Airbus narrowbody planes to begin renewing its domestic fleet.

It also expects to place an order by for A350 widebody jets capable of the world's longest non-stop commercial flights from Sydney to London that could start in mid-2025, he said.

"We are hoping to get to both of them by the middle of the year," he said of the orders. "They may not be the exact same time." REUTERS