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Loss of 10 Billion, another Aviation Giant Has Experienced the Biggest Dilemma

On August 20, local time, Australia’s largest airline-Qantas’ 2020 financial report showed that up to now, the company has lost 1.964 billion Australian dollars (approximately RMB 10 billion), which is Qantas’s first loss in the past 6 years.

In this regard, the Qantas CEO said that this is the biggest dilemma the company has experienced since its founding 100 years ago.

Income dropped by 82% during the epidemic

The financial report shows that in fiscal 2020, Qantas’ revenue fell by 20.6% year-on-year to A$14.257 billion, of which, affected by the epidemic, revenue from April to June this year decreased by 82%.

Net profit for the 2020 fiscal year fell 333.8% year-on-year to a loss of 1.964 billion Australian dollars (about 10 billion yuan).

The company’s announcement also stated that in the year ended June 30, 2020, the group completed an over-the-counter stock repurchase of 443 million yuan. The Group purchased 79.7 million issued common shares at a discount of 5.56 yuan (market price of 6.47 yuan, calculated at a 14% repurchase discount).

In February 2020, the group distributed a dividend of 13.5 Australian cents per share and an over-the-counter share repurchase of up to A$150 million. In order to cope with the impact of COVID-19 and maintain liquidity, the over-the-counter stock repurchase plan was subsequently canceled in March 2020, and the interim dividend distribution plan was canceled in June 2020.

On the day when Qantas released its earnings report, its share price opened low and stabilized. As of the close, it rose 3.72% to close at 3.9 Australian dollars.

Overview of QNA
Overview of QNA

Layoffs, grounding, 20,000 people on standby

In March this year, due to the spread of the epidemic, the Australian government imposed an entry ban on all international visitors. Only Australian citizens, permanent residents, and their close relatives can enter the country. Australian citizens are not allowed to leave the country.

As the international epidemic situation is getting more and more severe, Australian Prime Minister Morrison said in August that at least “a few months” in the future, such border closure measures will be implemented. This means that Australia may not be able to open its borders until 2021.

It is understood that at the beginning of the epidemic, Qantas announced that it would suspend international flights until the end of July; in June, as the epidemic has not stabilized, Qantas announced that it would extend the suspension until the end of October; in July, due to the repeated epidemic, Qantas Airways once again announced that the decision to suspend flights will be postponed until the end of March next year.

According to Qantas’ 2019 financial report, the company’s pre-tax profit on international routes is as high as 3.7 billion Australian dollars (approximately 18.3 billion yuan). In other words, the stagnation of international routes is tantamount to reducing revenue by half for Qantas.

At the same time, according to foreign media reports on August 20, the current capacity of Qantas is only 1% to 2% of that before the epidemic.

In the case of serious losses, Qantas had to start “self-help”. The first is layoffs to reduce operating costs. In June, Qantas announced plans to lay off 6,000 people. Currently, the company still has 20,000 people waiting for work at home; secondly, it will ground 100 passenger aircraft in the coming year. It is said that these measures will save 10 billion Australian dollars in expenses.

While throttling, Qantas also strives to increase revenue. According to foreign media news on August 16, although the resumption of international flights is a long way off, Australian Airlines came up with an idea of ​​”Antarctic sightseeing flights”. That is, take Australian passengers to sightsee over Antarctica, but the plane will not land in Antarctica, but fly back to Australia after a circle.

Selling “business class pajamas”

In addition, Qantas also launched the “care package” sales business, selling a “care package” containing business class pajamas, Tim Tam biscuits, and extra comfort kits for 25 Australian dollars (about 124 yuan) to clean up excess inventory to raise much-needed cash.

When Qantas launched its “care package”, it said that these packages would be the perfect gift for friends and family members who are living in lockdown during the epidemic.

Care package
Care package

Each $25 care package will include:

  • Two sets of Qantas Business Class pajamas
  • Business-class comfort package with mini ASPAR products
  • 12 individually packaged Tim Tam biscuits
  • 200g pack of first-class smoked almonds
  • A pack of 10 T2 lemongrass and ginger tea bags

The second-largest airline has gone bankrupt

In April this year, Australia’s second-largest airline, Virgin Atlantic, declared bankruptcy after the Australian government refused to allocate 200 million Australian dollars for its “life extension”. Tens of thousands of employees were unemployed.

The financial report shows that Virgin Australia has suffered losses year after year. The total loss in the past ten years has exceeded 2.1 billion Australian dollars. The actual debt is as high as 5 billion Australian dollars (approximately 22.4 billion yuan). The company has unaccounted debts of 4 billion Australian dollars, but its market value is only 7.2 Billion Australian dollars. According to media reports at the time, the rescue of Virgin Australia was undoubtedly a waste of taxpayers’ money.

But the Australian government does not say “No” to all airlines. According to foreign media reports in June, the Australian government said it would continue to subsidize domestic flights until September. As of June, the government subsidies for domestic flights have exceeded 1.2 billion Australian dollars (about 5.9 billion yuan).

Over 23 airlines in the world go bankrupt Since the epidemic

Since the outbreak of the new coronavirus epidemic, 23 airlines around the world have closed down, including South African Airways, Alitalia, Compass Airlines, Flyby Airlines, and Miami International Airlines.

Even if there is no bankruptcy, the remaining major airlines face huge losses.

American Airlines and Southwest Airlines reported earnings in July that both companies suffered quarterly losses. In the second quarter, American Airlines’ revenue in the second quarter fell by more than 86%, from nearly US$12 billion in the same period last year to US$1.6 billion; Southwest Airlines’ revenue also plummeted by nearly 83% from the same period last year, US$5.9 billion fell to just over US$1 billion.

American Airlines also issued a warning to 25,000 employees that they may face the risk of unemployment and urged them to apply for voluntary separation programs and early retirement.

British Airways, Lufthansa, Emirates, and Qantas have announced plans for thousands of layoffs and unpaid leave.

China’s aviation industry recovers by 90%

The global aviation industry as a whole is bleak, but there is good news from China’s civil aviation industry…

As early as April, Cirium, a global travel and data analysis company, stated that China’s domestic air travel capacity is recovering, becoming the “light of hope” for the recovery of the global aviation industry. Data at the end of July also showed that the number of domestic flights in China was only about 10% from the level before the outbreak, ranking first in the world.

With the gradual stabilization of the domestic epidemic situation, China’s previous international route restrictions have begun to gradually loosen.

According to Wu Shijie, deputy director of the Aviation Safety Officer of the Civil Aviation Administration, introduced at a regular press conference in August, as of August 12, a total of 93 Chinese and foreign airlines (19 domestic and 74 foreign airlines) operate 187 scheduled international passenger routes. It operates 210 round-trip flights every week and maintains regular passenger services with 50 countries. During the more severe period of the epidemic, regular passenger flights have resumed with 20 countries.

Last week, the Civil Aviation Department confirmed that the U.S. Department of Transportation issued an announcement on the 18th that it allows Chinese airlines to increase scheduled passenger flights to and from the United States to eight per week, which is equivalent to the total number of flights that the Civil Aviation Administration of China recently allowed U.S. carriers to fly, the instruction takes effect immediately.

After this expansion, the number of routes between China and the United States will double to a total of 16 flights per week.

Nancy Huang
Nancy Huang
I'm a journalist in Shenzhen, China. I have been working in several news agencies in China since 2008.

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