Qantas has finally bitten the bullet and started adjusting to life as an airline in a COVID-19 world.
It revealed on Thursday plans to sack at least 6,000 of its 29,000 employees, will report a massive loss for the year to June in excess of $2.8 billion, and has launched a $1.9 billion capital raising in response to the COVID-19 pandemic.
As well it was end the career of its remaining Boeing 747 jumbos and rest all of its Airbus A380 jumbos, park 100 of its planes for at least the next year, cut billions in costs as it shrinks itself to compete in a very different environment post-COVID-19.
The 10 cents a share interim dividend suspended earlier this year as the pandemic took hold and lockdowns started, has been cancelled and dividends will not restart for some years, judging by the airline’s comments yesterday and those of CEO, Alan Joyce.
As well the luxury of share buybacks to return excess capital to shareholders is over as Qantas looks to preserve as much liquidity as possible.
In some ways, it is a similar strategy Air New Zealand took except it was recapitalised by its major shareholder, the NZ government. Air NZ’s 777 long haul planes are being parked for an indefinite period with a $NZ450 million write down in their value and a third of its 12,000 staff is being cut as the company looks to cut its size by a third in the two years.
Qantas’ revamp is nowhere near as brutal as that now underway at Emirates which is slashing its 65,000 worldwide staff by around 30,000, with more than 12,000 jobs already gone.
The raising comes after the airline raised $2.5 billion in two issues of debt earlier this year to help it keep going through the lockdowns. Now they are easing and it’s a different stance the airline has to take with the knowledge that the days of an all singing all dancing airline business, planning non-stop flights from Australia to New York and London, have ended.
Qantas said on Thursday morning the moves are part of a three-year plan to “accelerate its recovery from the COVID crisis and create a stronger platform for future profitability, long-term shareholder value, and to preserve as many jobs as possible”.
The airline said that as part of a plan to save $15 billion in costs over three years, it will retire its six remaining Boeing 747s immediately, six months ahead of schedule; ground around 100 aircraft including most of its international fleet for up to 12 months, and defer deliveries of new Boeing 787 Dreamliners and Airbus A320neos.
Around 15,000 employees will remain stood down from duties until flying returns. All Qantas’ international passenger flights are suspended and it is flying about 15% which will build slowly in the coming weeks.
News of the 6000 redundancies took the headlines yesterday, but many of the other moves were just as dramatic.
Those losing their jobs will include office roles (1,450), ground operations including baggage handlers (1,500), cabin crew (1,050), engineering (630), and 220 pilots.
Qantas chief executive Alan Joyce said the company entered the COVID-19 crisis in better shape than most airlines and had better prospects for recovery than most.
“But it will take years before international flying returns to what it was,” he said in yesterday’s statement.
“We have to position ourselves for several years where revenue will be much lower. And that means becoming a smaller airline in the short term.”
Qantas said its board had asked Mr Joyce to remain CEO at least until the middle of 2023 to ensure “leadership, experience, and stability”. By then, Mr. Joyce will have run the airline for almost 15 years.
