Australia's Qantas swings to annual loss and warns of a 'tough' 2021

The airline's recovery plan will help it save A$15bn over three years, CEO says

Qantas Chief Executive Officer Alan Joyce gestures during a results announcement in Sydney, Thursday, Aug. 20, 2020. Qantas Airways announced that the pandemic cost it 4 billion Australian dollars ($2.9 billion) in revenue in the last fiscal year and warned that international travel won't resume before mid 2021. (Dean Lewins/AAP Image via AP)

Australia's Qantas Airways warned 2021 will be another "tough" year after swinging to its first annual loss since 2014, as write-down of assets and staff redundancy costs to cope with the pandemic dented earnings this year.

The carrier reported a statutory loss after tax of A$1.96 billion ($1.4bn/Dh5.1bn) for the 12 months ending June 30, compared with a profit of A$840 million in the previous financial year, it said in a filing to the Australian Securities Exchange on Thursday. Annual revenue fell 20.6 per cent to A$14.2bn.

The results were shaped by the worst operational conditions in the airline's 100-year history, Alan Joyce, chief executive of Qantas, said.

"The impact of Covid[-19] on all airlines is clear. It's devastating and it will be a question of survival for many," Mr Joyce said in a statement. "Recovery will take time and it will be choppy."

The Sydney-based carrier joins the ranks of other loss-making operators around the world from Hong Kong's Cathay Pacific to Texas-based American Airlines as the pandemic, the worst crisis in the history of aviation, decimates air travel demand. Global airlines are headed for a record $100bn collective loss this year, according to the International Air Transport Association (Iata). The industry's main trade group expects that passenger traffic will not recover to pre-crisis levels before 2024. 

Qantas expects its losses to extend into the next fiscal year.

"Covid[-19] will continue to have a huge impact on our business and we’re expecting a significant underlying loss in FY21,"Mr Joyce said, calling it "another tough year."

Most international flights, he said, are also unlikely to resume until a vaccine is widely distributed, which might occur in mid- to-late next year.

The carrier had expectations of delivering a profit this year before the pandemic hit.

"We were on track for another profit above A$1bn when this crisis struck," Mr Joyce said. "The fact that we still delivered a full year underlying profit shows how quickly we adjusted when revenue collapsed."

The airline's underlying profit before tax, a measure of earnings excluding one-time costs and its most-watched financial figure, fell 91 per cent to A$124m.

Qantas said it took a A$1.4bn non-cash charge against a write down  of assets including its Airbus A380 fleet and A$642m in one-off redundancy and other costs as part of restructuring the business for recovery.

In the second half of its fiscal year, the airline reported a A$4bn drop in revenue and a A$1.2bn slide in its underlying profit due to the virus outbreak.

Qantas Group's available liquidity stood at A$4.5bn at June 30, including A$1bn of undrawn facilities, it said. Net debt reached A$4.7bn and it has no major debt maturities until June 2021.

Planned capital expenditure was reduced by A$400m in the second half for a total of A$1.6bn in the fiscal year. It expects "significant" further reductions in the next financial year with the deferral of Boeing 787-9 and Airbus A321neo plane deliveries to meet its requirements.

Qantas said its three-year recovery plan, which was announced in June, is expected to save the airline A$15bn and is "well underway".

The savings will come from a smaller cost base after redundancies and lower fuel lower maintenance costs after putting most of the fleet in hibernation, Mr Joyce said.

Around 4,000 of at least 6,000 planned redundancies are expected to be completed by the end of September.

“Looking further ahead, we’re in a good position to ride out this storm and make the most of the recovery," Mr Joyce said. "Our market position is set to strengthen as the only Australian airline with a full service and low fares domestic offering as well as long haul international services."