Australian airline Qantas (ASX: QAN) has been in the news for a myriad of reasons lately. And none of them have been positive. Most recently, the Company reported its third major loss following Covid-19, with the underlying loss before tax amounting to $1.86 billion and statutory loss being over $1 billion.
According to the Company, this loss is a result of the Delta and Omicron Covid variant impacts as well as upfront costs from restarting the airline as lockdowns finally ended.
Qantas Group CEO Alan Joyce commented, “This result takes the Statutory Loss Before Tax impact of COVID on the Qantas Group to nearly $7 billion and our total revenue losses to $25 billion. These figures are staggering and getting through to the other side has obviously been tough.”
The first three quarters of the year were defined by border closures and Covid uncertainty, while the fourth quarter saw the highest sustained levels of travel demand since the start of the pandemic.
Yet, in July 2022, 300 flights were cancelled owing to weather conditions and other runway factors. Over 300 pilots were on sick leave or isolating every day, and the airline struggled to manage customer influx.
Because of that, the airline was forced to employ executive managers and other senior officials as baggage handlers amid labour shortage. Manpower was down nearly 28% as the Company aimed to rightsize and restructure its organisation as part of the Recovery Plan program
Borders reopening aided demand, which, combined with the Company’s recovery plan, has resulted in a significant improvement to the balance sheet. Net debt has fallen from a high of more than $6.4 billion to $3.9 billion at the end of FY22, putting it below the optimal target range of $4.2 billion to $5.2 billion.
Currently, Qantas is trying to respond to the many operational challenges it is facing, starting with customer measures. It is working on improving contact centre wait times, cancellation rates and mishandled bag rates as they trended back towards pre-COVID standards during August 2022.
With $1 billion in savings in FY23, Qantas’s recovery plan is going as planned. It has invested over $400 million in customer loyalty and experience, new lounges and new routes.
Joyce added that while safety remains Qantas’s number one priority, its service isn’t at the level expected of the national carrier. “There is a lot of work happening to bring us back to our best, including hiring more people, rolling out new technology and reducing domestic flying so we have more sick leave cover,” he divulged.
In keeping with that, it has announced more staff travel benefits and the first capital return for shareholders since they provided the airline $1.4 billion at the start of the pandemic to support its recovery plan.
Addressing the challenge of labour shortage, Qantas is now training over 1,500 people joining the organisation and 1,000 internal appointments made since April 2022. At the end of 2023, a new flight training centre is set to open in Sydney, and a new cabin crew training centre has been officially opened in Mascot as of August 25, 2022.
In a bid to retain its staff, the Staff Travel scheme will be improved to include better access for family members and an expansion of the already significant fare discounts on standby travel. The Company expects to spend approximately $50 million on pay increases for EBA-covered employees as agreements are finalised in FY23, taking the average non-executive salary at Qantas to more than $100,000. This is in addition to approximately $200 million being set aside for a $5,000 recovery boost payment.
During the FY22 results speech, Joyce informed that COVID cost Qantas more money in the past three years than the Company made in the five years before that. Going forward, the Company expects leisure and business travel to pick up significantly, thus resulting in a positive financial outlook for the coming years.
Alinda is a Business Reporter for The Sentiment
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