Australia’s Qantas Airways Ltd has said that for the next financial year it predicts an increase in domestic travel capacity which would will exceed pre-pandemic levels. The airline, which pre-pandemic relied on its domestic business and loyalty division for the majority of its profits, raised its forecast for the current quarter following high demand for travel within the country.
1. Travel in Australia
Australia closed its borders to all non-citizens and non-residents over a year ago in March 2020, and the country is nearly free of Covid-19, excluding infrequent small outbreaks. However to maintain this, the country still has an international travel ban in place with little sign of this lifting. Consequently, with the exception of travel to New Zealand, all of Qantas’ international business will be grounded until at least October 31st, depending on the speed of the vaccination rollout in Australia. In recent months there have also been various closures of state borders due to small outbreaks, and these have seriously impacted air traffic on major domestic routes like Sydney-Melbourne and Sydney-Brisbane, greatly effecting Qantas Airways.
2. Qantas Airways
Going into the pandemic Qantas had one of the industry’s strongest balance sheets, although its biggest domestic rival, Virgin Australia, benefited from a bankruptcy restructuring which enabled the airline to cut fixed costs more than Qantas. Qantas has seen a strong demand for domestic travel in recent months, and as Chief Executive Alan Joyce said last week, a return to 90% of pre-pandemic domestic capacity in the fourth quarter (ending June 30th) will allow the company to report positive cashflow, a huge help in beginning to recover from the extra debt which helped see it through the crisis.
Joyce also stated that the airlines’ current priority is generating cash through offering low fares to stimulate demand and getting employees back in the air, rather than worrying about a quick return to profitability factoring in interest and depreciation. He told reporters “We may not be making a full statutory profit before tax with a lot of this flying”, continuing, “We don’t have to. We are here to reactivate and start things up again but we will be covering cash costs and we will be improving our balance sheet and they are the important things for us in this phase of the recovery.”
It is expected that domestic capacity will continue to grow in fiscal 2022, with low-cost brand Jetstar (a wholly owned subsidiary of Qantas) reaching 120% of pre-Covid levels and Qantas at 107%, according to the airline. Speaking about the airlines future, Joyce stated he was not prepared to say whether this could lead the company to return to a profit in fiscal 2022, adding, “A lot depends obviously on whether the domestic borders stay open, a lot depends on when international starts, if New Zealand stays open a lot.”
“A lot depends obviously on whether the domestic borders stay open, a lot depends on when international starts, if New Zealand stays open a lot.”
Alan Joyce, Chief Executive Qantas Airways Ltd.
