QANTAS GROUP MARKET UPDATE – CEO REMARKS
Good morning and thanks for joining us.
Hopefully you've had a chance to read our statement.
I'd like to talk briefly about the trading conditions we're seeing and what this means for our financial performance. Vanessa and I are then happy to take your questions.
BORDERS
Since we last updated the market at our AGM in October, there's been a lot of positive news on the pandemic.
Australia has continued to be a world leader in managing COVID - including how it responds to outbreaks.
That success has meant the easing of more border restrictions - and by next week, we'll almost be a federation again.
As you know, we think this is long overdue in some places, and we welcome it.
What's critical now is that we adopt a national framework for borders. A set of rules that reflects our confidence in the testing and tracing systems that have worked so well in New South Wales in particular, so that we're not faced with borders slamming shut again.
TRAVEL DEMAND
Can I say, there's a very human aspect to these border openings.
I've never seen so much hugging at domestic terminals, particularly between cities that are only an hour apart.
That need to reunite is part of what's driving the strength in bookings we're seeing.
And people looking for a change of scene - with a lot of traffic coming out of Melbourne for short breaks elsewhere.
There's also a lot of corporate travellers on the triangle again.
That's likely to increase for Qantas, off the back of the corporate share that has shifted to us - some 25 large accounts have come across this year.
Overall, the booking data make it clear that demand is back. Let me give a few examples of what we're seeing.
Qantas and Jetstar sold over 200,000 fares in the 72 hours after Queensland opened to Greater Sydney and Victoria. That's a remarkable number.
We're adding more services to Perth now that the borders have opened. We were caught a bit short with the borders opening earlier than expected, but we'll be using our 787s next week on Sydney to Perth to quickly bring in some extra capacity, and that's brought air fares down essentially overnight.
In the past few months, we've added 11 completely new routes to our network. These are opportunities that have come about because people are looking at differently at domestic travel options, and we have aircraft to spare. Routes like:
FREQUENT FLYER
We made a decision several months ago to significantly increase the domestic seats available for Frequent Flyer redemptions. We've expanded them by 50 per cent, in recognition of international redemptions being off the cards for a while.
The response has been great. Over the past three weeks, redemption bookings were literally twice what they were over the same period last year.
Last week, Frequent Flyer bookings on Jetstar were up 175 per cent compared versus last year.
We expect this to drop back, but what all of this shows is:
- people want to travel
- they want to travel with us, and
- they continue to get value from the Qantas Points - which is excellent news for Loyalty.
VACCINES
The second area of good news since our October update is progress on vaccines.
Australia's success at virtually eliminating COVID means we'll need a vaccine for international travel to restart properly.
As the Prime Minister said, it will become a binary choice for international travellers to either get the vaccine or quarantine for two weeks. And quarantine places are very limited.
Our position on this is clear. We have a duty of care to our people and our passengers, and once a safe and effective vaccine becomes readily available, it will be a requirement for travel on our international services.
There will be some exceptions for people who can't - for medical reasons - take vaccines. And our flights to New Zealand will probably be exempt given their success at controlling COVID as well, just as domestic flights will be exempt.
I acknowledge some people are opposed to vaccines in-principle. We respect that. But in return, we ask everyone who travels on Qantas and Jetstar to respect our safety protocols - which will include a COVID vaccine for international flights, at least until the pandemic is under control overseas.
In the past week, we've asked some of our customers their thoughts on this:
- 87 per cent said they would take a COVID vaccine if it was required to travel internationally.
- 85 per cent thought it should be required for travel to at least some countries.
We will always put safety ahead of popularity - but it seems the vast majority of our customers agree with us on this.
FINANCIAL PERFORMANCE
Turning to what this good news on borders, travel demand and managing the virus means to our financial performance.
We're announcing today that we expect to be close to break even at the Underlying EBITDA level for the first half.
To be clear on what this means - we're not back in the black. Far from it. We will post a significant loss this year.
Broadly speaking, it means the strong performance of Qantas Loyalty and Qantas Freight - and now the improving performance of Group Domestic - covers the overheads from our stranded costs in International.
We're faced with carrying these assets until at least July next year before they start generating cash again.
We've have had to take on more than $1.5 billion in additional debt to get through this crisis. We've lost $11 billion revenue this financial year alone. Repairing our balance sheet is going to take a long time. And we know the domestic market is going to be very competitive.
That's why our restructuring program is so important - even though it means a lot of hard decisions.
Having said all that, the outlook is a lot more positive than it was six months ago. It's great to see more of aircraft back in the air, along with more of our people. And we're optimistic it will keep getting better from here.