Qantas Airways (QAN)

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25 February 2021

Results 

Half Year 2021

Half Year 2020

Change

Revenue ($m)

2,330

9,464

-75.4%

Domestic Revenue ($m)

1,003

3,218

-68.9%

Passengers Carried (m)

4.915

28.876

-83%

Underlying (Loss)/Profit Before Tax ($m)

(1,034)

771

n/a

Statutory (Loss)/Profit After Tax ($m)

(1,081)

445

n/a

Underlying EBIT ($m)

(888)

900

n/a

Interim Dividend ($)

-

0.12

n/a

Qantas Airways (QAN) experiences turbulent times from COVID-19 pandemic        

What happened?

  • National carrier, Qantas Airways (QAN) experienced a sharp drop in its first half performance compared to this time last year, but was still slightly ahead of analyst expectations. Revenue slumped 75% to $2.33 billion and a statutory loss after tax of $1.08 billion was reported. The airline’s underlying loss before tax, its preferred measure of performance, was $1.03 billion.
  • Not surprisingly, QAN decided against an interim dividend for the half, having paid 12 cents per share a year ago.
Why did it happen?
  • COVID-19, travel restrictions and border closures have hobbled QAN’s operation. This has led to a ~$7 billion—or 75%—decline in first half revenue with the group losing ~$11 billion since the start of the pandemic. The total number of passengers carried also slumped 83% to just 4.9 million compared to 28.9 million a year ago.
  • Re-opening of domestic borders over the six months saw a swell of domestic travel demand, but snap border closures amid local clusters hampered this recovery. Domestic revenue came in just over $1 billion, still down 68.9% on the prior year, but contributed nearly half of the group’s total revenue. The segment also remained profitable with underlying EBITDA [earnings before interest, tax, depreciation and amortisation] of $28 million recorded, despite only operating at 30% of pre-COVID capacity.
  • The grounding of its passenger business due to international border closures negatively impacted Qantas International which operated at 8% of pre-COVID capacity. The segment was supported by the limited travel bubble between Australia and New Zealand and government-sponsored charter flights to bring home stranded Australians.
  • Supporting the International segment was the inclusion of the Freight business which saw record performance. Net freight revenue increased to $613 million from $496 million due to higher volumes in e-commerce activity. This helped bring the International segment EBITDA profit of $55 million, while revenue came in at $722 million.
  • Jetstar faced similar issues to the Qantas-branded domestic and international segments. Revenue fell to $384 million and underlying EBITDA was a $98 million loss. Meanwhile, Loyalty provided a cash contribution of $454 million and underlying EBITDA profit of $152 million. Frequent Flyer members grew to 13.5 million, while its retail businesses—such as Qantas Wine and Qantas Store—benefitted from increased shopping online. Customers also explored ways to use or earn points without flying.
  • With the majority of its fleet grounded, QAN is focussed on restructuring and transforming the business for the post-COVID recovery, aiming at a $1 billion minimum in annual savings from FY23. It’s looking to target $600 million in FY21 savings which it is on track to achieve. A part of those savings involves 8,500 people leaving the business. About 5,000 are already gone and the remainder is set to leave by the end of the financial year.

Where to now?

  • Qantas is expecting the domestic travel scene to recover far quicker than international. Domestic capacity is anticipated to increase to 60% of pre-COVID levels in Q3 and 80% by Q4, while the assumption for international travel to restart has been moved back to October 2021. Much of the assumptions are dependent on border restrictions and the success of the vaccine rollout.
 

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