“I’ve been to cities that never closed down, from New York to Rome and Old London Town but no matter how far or how wide I roam, I still call Australia home.” It’s the iconic sounds of the Australian Boys and Girls Choir that made Australian marketing folklore with Qantas’ heart-tugging 1998 ad. Unfortunately for generations of today, it’s not quite as relatable but that is set to change with the resumption of various international routes.
Despite forecasting that their international flight capacity for FY22 will only fall around just 20-30% due to Australia’s strict border restrictions, Qantas (ASX: QAN) is bringing their working force back with all stood down Australian-based employees able to return.
The return to work has been catalysed by a huge surge in domestic travel booking with the tourism industry finally overcoming the impact of Delta-strain COVID-19 lockdowns. This has resulted in the Group’s domestic capacity expected to be 102% compared to pre-COVID levels for the March FY22 quarter, and increased further to 117% for the June quarter.
“This has been one of the worst halves of the entire pandemic, where most states had their borders closed and the majority of Australians were in lockdown. Domestically, our capacity fell to around 30 per cent of pre-COVID levels for several months,” said Qantas Group CEO, Alan Joyce.
“Fortunately, the structural changes we made earlier in the pandemic put us in a good position to weather these extremely poor trading conditions while the national vaccination rate reached a point where states started to open back up.
“Australia now has one of the highest levels of vaccination and it’s still rising. That sets us apart from many other countries and puts us in a much better position to manage uncertainty around variants and seasonal surges.”
Quick reactions to snap lockdowns assisted Qantas in reducing their operating costs but the carrier is still forecasting an underlying EBITDA loss around $300 million for the half-year ending 31 December 2021. This will increase to more than $1.1 billion once non-cash depreciation and amortisation costs are included.
With the assistance of their recent $802 million land sale, the Company is in a reasonable cash position with a long-term view that international travel for leisure will start increasing from January 2022 onwards.
Routes to London, Los Angeles and Singapore have already restarted while bookings have been very strong for the new routes from Melbourne and Sydney to Delhi.
While Qantas’ capacity for international travel will be just 5% for June – December 2021, the Group forecasts that to increase to 30-40% in the March quarter and then 50-70% for the June quarter.
Despite the travel restrictions enforced over the past two years, Australians have been busy racking up Qantas Frequent Flyer points during that time. In November, Qantas Loyalty reported its single busiest day for flight redemptions in a 24 hour period while the program is also expected to introduce a new ‘Green’ Frequent Flyer tier for customers that will be rewarded for making eco-friendly decisions on the ground and in the air.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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