News of the international travel bubble between Australia and New Zealand is music to the ears of Qantas (ASX: QAN) CEO Alan Joyce, who has probably endured the toughest gig amongst top executives having had to navigate $11 billion in lost revenue through no fault of their own.
While the airfares will be one way for Qantas to stop the bleeding initiated by the COVID-19 pandemic, periphery businesses run by the airline operator will also benefit from travel between Australia and New Zealand within days of the Trans-Tasman bubble announcement. Qantas secured more than 10,000 bookings within the first few days as a sign of the hunger to travel amongst Australians.
Having been unable to use their Qantas Points during the pandemic, many Aussies have built up their points balances and are raring to claim them as evidenced by an 8x increase in flights paid for on Points within the first four hours of listings.
“The two-way bubble with New Zealand is great news for the tourism sector as a whole. It means we can bring other parts of our business out of hibernation, like our aircraft and First lounges in Australia,” said Joyce.
“The increased domestic flying and resumption of flights across the Tasman are also helping get more of our people back to work.”
Part of the Qantas business coming out of hibernation will include premium lounges at airports as well as customer service, aircraft reactivation and employee training.
Pivoting from their Premium brand strategy in the short-term, the carrier will push low cost fares with a focus on traveler volume, rather than high-end service until international travel around the world returns to normal.
“The Australian Government’s half-price fares program is having a direct and indirect impact on the sector. The direct response to the program has been fantastic, with over 250,000 fares sold in the first two weeks.
“Indirectly, we saw a big spike in travel demand before the fares even went on sale because the announcement itself gave people confidence, which is something that had been missing for months.”
Although this appears to be the most upbeat Joyce has been in the past 12 months, he remains conscious of the massive losses incurred by the pandemic and the longer-term focus to ready the flagship carrier for a post-pandemic world.
“It’s important to keep this uptick in perspective. We are still facing a massive financial loss this year, which will be the second one in a row. We’ve lost more than $11 billion in revenue since the pandemic started and that number will keep growing until international travel recovers.
“We’ve used debt and shareholder equity to get through to this point, and our people have had the benefit of direct government support, which continues for those still stood down due to international border closures.
“The vaccination program is absolutely key to restarting international flights in and out of Australia. While there have clearly been some speedbumps with the vaccine rollout, we are still planning for international flights to resume in late October. We remain in regular dialogue with the Government.”
Even with this resumption of international travel and their domestic operations now running at 90% of pre-COVID levels, Qantas expects to report a $400 million EBITDA loss for FY21.
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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