Qantas to start repairing finances by June as local demand jumps
[SYDNEY] Qantas Airways expects to start repairing its finances within months and said it's upbeat about a recovery after a rebound in sales on the airline's domestic network.
Qantas will fly the vast majority of its normal domestic schedule next quarter after major state borders inside Australia reopened, it said on Thursday. By June, the airline will be generating enough cash to begin fixing its balance sheet, it said.
"We've seen a vast improvement in trading conditions over the past month," chief executive officer Alan Joyce said. "There's been a rush of bookings as each border restriction lifted, showing that there's plenty of latent travel demand across both leisure and business sectors."
"Overall, we're optimistic about the recovery," he said.
The outlook for Qantas's domestic network - the profit engine of the group - is better than the airline expected just last month. While Hong Kong's Cathay Pacific Airways and Singapore Airlines struggle, with no domestic travel market to tap, Australia has largely suppressed Covid-19 and more local flights are being added.
Shares of Qantas, which have rebounded since March from a low of A$2.14, were unchanged at A$5.55 at 10.09am in Sydney.
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Queensland's state border reopened this week to all of New South Wales and Victoria, allowing a recovery in services between the state capitals of Brisbane, Sydney and Melbourne.
Qantas's capacity on routes in Australia will increase to 68 per cent of pre-pandemic levels in December, and reach almost 80 per cent in the first three months of 2021. Qantas expects to be close to break even - based on underlying earnings - in the six months ending December, and net free cash-flow positive in the six months ending June.
INTERNATIONAL DOLDRUMS
Still, Mr Joyce reiterated there's likely be almost no international flights until at least July 2021, and global travel will take years to recover. Qantas said it will post a "substantial" net loss for the year ending June 2021.
Qantas also shed light on its tussle with reborn rival Virgin Australia under the ownership of private equity firm Bain Capital. Qantas said a "large number" of corporate customers have moved to Qantas this year, and the trend has accelerated in recent months. Qantas expects to maintain its domestic market share above 70 per cent.
Qantas had A$3.6 billion (S$3.57 billion) in available liquidity as at Nov 30, comprising A$2.6 billion in cash and A$1 billion in undrawn credit. The airline said it has no material debts due until April 2022. Net debt was A$5.9 billion on Nov 30.
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