QANTAS believes it will stop bleeding cash by the second half of 2021 as thousands of Australians embark on domestic holidays this festive season.
In a statement to the ASX, the airline said it still expects to post a “substantial statutory loss” for the 2021 financial year but expects earning to “be close to break even” for the first half of the year and at net free cash flow positive, excluding redundancies, in the second half.
“The Group remains one of only a handful of airlines in the world to retain an investment grade credit rating through the pandemic,” the airline said in the statement.
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Qantas Group CEO Alan Joyce said there has been a vast improvement in the aviation sector over the past month, mostly because of Queensland re-opening its borders to Greater Sydney and Victoria.
He admitted the airline’s expectations for the next few months relied on the borders staying open.
“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,” Mr Joyce said.
“Between Qantas and Jetstar, there were over 200,000 fares sold for flights to Queensland in 72 hours after the border openings with Sydney and Victoria were announced.
“We’re also seeing people booking several months in advance, which reflects more confidence than we’ve seen for some time.”
The airline’s domestic capacity will increase to 68 per cent of pre-COVID levels for December, rising to nearly 80 per cent early next year.
“Bringing domestic capacity back to almost 70 per cent in December is very positive compared to where we’ve been, and so is seeing more of our people back at work. But overall the Group is still a long way off anything approaching normal,” My Joyce said.
Qantas’ international operations largely remain grounded aside from ongoing repatriation flights and a limited number of fervice to New Zealand under a one-way bubble arrangement.
“It’s unclear what shape the domestic economy will be in next year, particularly once broader government support winds back. Until a vaccine is rolled out, the risk of more outbreaks remains,” Mr Joyce said.
“International travel is likely to be at a virtual standstill until at least July next year and it will take years to fully recover, which means we’re carrying the overhead for billions of dollars worth of aircraft in the meantime.
“We’re also facing a revenue drop of at least $11 billion this financial year alone compared to pre-COVID.
“Overall, we’re optimistic about the recovery but we’re also cautious given the various unknowns. We also have a lot of repair work to do on our balance sheet from the extra debt we’ve taken on to get through the past nine months.”