Qantas set to emerge from pandemic stronger, airline chief says

Qantas chief executive Alan Joyce expects Australia's largest carrier to stop burning through cash and restore seat capacity to at least half its pre-virus levels by Christmas, a rare note of optimism from an airline industry devastated by the coronavirus pandemic.

Australia’s adept handling of the Covid-19 crisis and tough calls made by the carrier’s management will allow Qantas to come out of the pandemic ahead of its rivals, Dublin-born Mr Joyce told the Financial Times.

As state borders reopen in a nation on the brink of eliminating local transmission of the virus, Qantas should be able to achieve cash break-even, begin rebuilding its balance sheet and target opportunities following the worst crisis in aviation history, he said.

“We are very optimistic. When we open up borders we’re seeing this massive surge in pent-up demand,” said Mr Joyce, who on Monday will launch Qantas’s centenary celebrations in Sydney.

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Mr Joyce said passenger numbers for European, US and Middle Eastern carriers were dropping due to surging Covid-19 cases while domestic rival Virgin Australia is still recovering from administration. The reopening of Australia, which contributes two-thirds of Qantas's profit, should enable the carrier to claim 70 per cent of the domestic market, up 10 percentage points on pre-Covid-19 levels, he said.

“We think we could be way over our 50 per cent [seat capacity] target by the time we get to Christmas, and that by far is one of the leading amounts of capacity being added anywhere in the world at the moment,” Mr Joyce said.

Qantas has been hit hard by the virus, which prompted Australia to close its international borders to non-residents and restrict travel between states. In May the airline revealed it was burning 40 million Australian dollars (€24.7 million) a week and that most international routes would remain closed until mid-2021.

Until last month, 70 per cent of domestic travel was either banned or subject to hotel quarantine, which meant capacity ran at just 25 per cent of pre-Covid levels – the lowest in the developed world, according to UBS.

Cost cuts

The restrictions have prompted the carrier to implement one billion Australian dollar cost cuts: furloughing 18,000 staff; raising 3.5 billion Australian dollars from shareholders and debt markets; and slashing 8,000 jobs.

Trade unions accuse Mr Joyce of using Covid-19 as an excuse to downgrade working conditions. Mr Joyce said management had to act decisively, otherwise Qantas could be among the 40 per cent of airlines that some analysts have warned could go bust.

“Qantas has survived for 100 years because it adapts, it evolves, it changes its model when it has to, and it takes the necessary action,” said Mr Joyce.

He said low prices would tempt passengers back to air travel and downplayed concerns fear of the virus would stop people flying. A study by the International Air Transport Association detected just 44 cases of in-flight transmission of the virus among 1.2 billion travellers, he said.

“The risk is one in 27 million people,” said Mr Joyce, who opposes implementing social distancing on flights, a move that dents profitability, and says pre-flight testing in Australia is not needed due to low case numbers.

He added that, in a post-Covid world, more international passengers would embrace direct ultra-long-haul routes, which could allow Qantas to reboot its delayed Project Sunrise strategy of launching direct flights from Sydney to New York and London. – Copyright The Financial Times Limited 2020