Jetstar suffered significant financial losses in New Zealand, Singapore and Japan due to continued border restrictions plus restart costs as flying gradually returned. Net debt has fallen from a high of more than $6.4 billion to $3.9 billion at the end of FY22, putting it below the optimal target range of $4.2 billion to $5.2 billion.
Total domestic flying averaged 63 per cent of pre-COVID levels for the year and reached 103 per cent by 30 June. With a cost base significantly below its competitors, Jetstar’s commitment to low fares saw 47 per cent of its customers pay less than $100 for their domestic flights, and 87 per cent pay less than $200 – a larger proportion than before the pandemic.
Qantas was one of only six airlines to retain an investment grade credit rating through the pandemic and, during the year, had its outlook upgraded to ‘stable’ by Moody’s.
Overall, the Qantas International and Freight division recorded an Underlying EBIT loss of $(238) million and an Underlying EBITDA profit of $448 million.
“We saw a big improvement in baggage handling and cancellations in August, which we expect will return to pre-COVID standards next month. The Group’s international capacity averaged 17 per cent of pre-COVID levels for the year but rose to 49 per cent by 30 June.
“We always knew travel demand would recover strongly, but the speed and scale of that recovery have been exceptional.
Group Domestic operations were profitable at the Underlying EBIT level in 4Q22. At the same time, Qantas Freight posted another record annual performance, and Qantas Loyalty accelerated its earnings growth to double digits in the second half. Across Qantas and Jetstar, revenue intakes from leisure bookings in the fourth quarter were approximately 125 per cent of pre-COVID levels, with the Group’s dual-brand strategy putting it in a unique position to meet demand from both the budget and premium parts of the market.
“The past year has been challenging for everyone.
“Safety remains number one, but our service isn’t at the level expected of the national carrier.
Work associated with the entry into service for the Airbus A220 and A321XLR for Qantas Domestic, and the A350 for Qantas International, is underway.
This drove Group Domestic to positive Underlying EBIT for the fourth quarter, but long periods of low activity combined with restart costs resulted in a full-year Underlying EBIT loss of ($1.1) billion. For the full 2022 financial year, the Group experienced an Underlying Loss Before Tax of $(1.86) billion and a Statutory Loss Before Tax of $(1.19) billion.
Qantas International will receive its three remaining Boeing 787-900s by FY23. Total liquidity on 30 June 2022 was $4.6 billion, including $3.3 billion in cash. Qantas Freight will receive two converted A330s in the second half of calendar 2023 and six A321F freighters from early calendar 2024 onwards to replace five 737-400Fs and help meet demand from a permanent increase in e-commerce from key customers, including Australia Post.
The reopening of borders saw a huge increase in forwarding travel demand, which, combined with the Group’s recovery plan, has significantly improved the balance sheet. This is expected to reach 75 per cent in September and around 80 per cent in October 2022, pending external factors such as extreme weather. Acquiring a majority stake in the online travel business TripADeal in May 2022 opened up new ways for members to earn and redeem points and offered a significant growth opportunity.
We’re also announcing the first capital return for shareholders since they provided us $1.4 billion at the start of the pandemic to support our Recovery Plan.” Underlying EBIT rose by 7 per cent across the year and increased by double digits in the second half as consumer patterns changed out of lockdowns.
Major improvements to several lounges starting progressively from late this year:
Creation of a Business Lounge in Adelaide (in addition to the existing Qantas Club) and full renovation of the Chairman’s Lounge. A decision to lower the number of points required for hotel and holiday redemptions in February 2022 helped drive a 40 per cent increase in bookings in 4Q22. While the reopening of Australia’s border in November 2021 finally saw international passenger travel return, the rebound was initially slowed by the Omicron variant and the delayed opening of key markets such as New Zealand and Indonesia. A new flight training centre in Sydney is scheduled to open by the end of calendar 2023, and a new cabin crew training centre has been officially opened in Mascot today.
A further $270 million in cost benefits were realised in FY22, bringing the total achieved under the Group’s COVID recovery plan to $920 million since FY20.
Extension of the increase in Classic Reward redemption seats by up to 50 per cent for a further 12 months. A lot of work is happening to bring us back to our best, including hiring more people, rolling out new technology and reducing domestic flying, so we have more sick leave cover. After several stop/start rebounds across FY22, domestic travel demand sustained recovery in the fourth quarter. This is the first return to shareholders since 2019 and follows $1.4 billion of equity raised at the start of the pandemic.
Key customer measures for Qantas, including contact centre wait times, cancellation rates and mishandled bag rates, are trending back towards pre-COVID standards during August 2022. This is in addition to approximately $200 million being set aside for a $5,000 recovery boost payment and 1,000 share rights for more than 17,000 people.
The Qantas Group has posted its third consecutive Statutory Loss Before Tax of more than $1 billion, reflecting the Delta and Omicron impacts and upfront costs from restarting the airline as lockdowns finally ended. The rebound in leisure saw the Group add more than 20 new domestic routes during the year. TripADeal’s sales rose 70 per cent in the first month following the acquisition compared with the month prior and the same period in 2019.
Over 150 million points have already been redeemed and 120 million points earned by Frequent Flyers on TripADeal packages. The Staff Travel scheme will be more generous, with better access for family members and an expansion of the already significant fare discounts on standby travel. The difference between these measures largely reflects the $686 million net gain on selling surplus land, which helped reduce COVID-related debt. The Group expects to spend approximately $50 million on pay increases for EBA-covered employees as agreements are finalised in FY23, taking the average non-executive salary at Qantas to more than $100,000. While this situation is temporary, it is driving strong yields across the Group’s international flying, offsetting the significant rise in the cost of jet fuel.
These improvements represent an investment of more than $400 million. The Board has approved an on-market share buyback of up to $400 million as recovery benefits materialise.
As recently announced: A $50 voucher is offered to all Frequent Flyers towards their next Qantas flight. The Group has resumed flying to 19 ports and announced eight new destinations, including Rome, Seoul and Delhi. In July, Jetstar took delivery of its first Airbus A321LR, which is 15 per cent more fuel efficient than its existing A320s. Our teams have done an amazing job through the restart, and our customers have been extremely patient as the whole industry has dealt with sick leave and labour shortages in the past few months. The annualised benefit of $1 billion is on track from FY23 onwards.
Written by: Jill Walsh
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